How To Start a Savings Account: A Step-by-Step Guide

You can start and open a savings account in only a few minutes if you have all of your information ready. Choose a bank or credit union, fill out the application, provide your ID and a deposit, if it's required. With a savings account, you can start building a nest egg for your future. 

Read on to learn how to start a savings account and why there are benefits to doing so.

Key Takeaways

• You can open a savings account in minutes. Most applications take just a few minutes online once you have your ID, Social Security number and funding source ready.

• Opening deposits are usually small. You may find banks that require a minimum between $0 to $100 to start, and some let you open an account with as little as $5.

• Your money is protected up to $250,000. Deposits at an FDIC-insured bank or NCUA-insured credit union are covered up to $250,000 per depositor, per institution, per ownership category.

• You'll typically need two forms of ID. Most banks and credit unions ask for a government-issued photo ID plus a second item such as your Social Security card or a bill with your name and address.

• Account type shapes your rate. High-yield and online-only accounts tend to offer higher APYs than traditional branch accounts, though some require a minimum balance.

• Automating deposits builds the habit. Setting up a recurring transfer from each paycheck can help you grow savings without thinking about it.

Summary generated by AI, verified by MoneyLion editors

Should I Start a Savings Account?

Opening a savings account can help you handle your day-to-day, while also setting up your finances for the future. Your money can grow and you can avoid taking on high-interest debt like credit cards if you have a sudden expense come up..

Here are some examples of the best ways to use your savings account funds:

• As an emergency fund

• Major purchases, such as a new car

• Vacation

• Unexpected medical expenses

What You Need To Open a Savings Account

• A government-issued ID

• A Social Security number (SSN) or tax identification number (ITIN)

• Your proof of address

• An opening deposit amount, if required

How Much Money Do You Need To Open a Savings Account?

Some banks may require an initial minimum deposit to open a savings account. You may find some that'll let you open an account with as little as $5. A typical range is around $25 to $100, though, you may even see some accounts that allow $0 to start. The key is to keep adding.

If you have a regular job and direct deposit of your paycheck, consider asking your employer to send an amount to your savings account every time you get paid. You may not notice it leaving your paycheck and you'll be happy that you stashed that money in the bank.

Automating Your Savings

One thing you can do to build up your savings is to set up automatic deposits. Having it done regularly makes it seamless transaction that you don't have to actively monitor, so it's essentially out of sight, out of mind.

You can do this in the following ways:

1. Split up your paycheck when it's being sent to direct deposit, or

2. Schedule a recurring transfer from your checking into your savings account.

You could start small — imagine $10 each paycheck if you're paid biweekly could be an extra $260 a year. The goal isn't to create a huge amount of savings with this method, but instead build up the consistency and habit of saving.

What Type of Savings Account Should I Open?

If you prefer in-person service, consider a traditional savings account with physical bank branches. If you want to earn and compound interest, consider a high-yield savings account or online banks that tend to offer competitive rates.

7 Steps To Open a Savings Account

Looking to open a savings account? Here’s how to start saving money in seven simple steps. 

1. Choose How To Apply

Decide whether you'd prefer to open a savings account online, by phone, in person or by mailing an application. Different banks have different options, but online is usually the fastest process. Opening a savings account online may even be easier than going into a bank branch or calling a branch. 

2. Provide Proof of Your Identification

Bank applications will usually require you to provide your Social Security number or tax ID number, information from a government-issued ID and more. Without a SSN or ITIN, you may only be able to open a no-interest account.

3. Provide Your Contact Info

Along with your identity documents, you’ll also have to provide your personal contact information, such as your full name, home address, date of birth and more. 

4. Select a Single or Joint Account

If you're married, you may choose to open an account with your spouse. You can also open an account with another family member, for example, or a partner you live with. For joint savings accounts, the other person will need their ID and contact information as well. 

5. Accept the Terms and Conditions

Banks have a number of terms and conditions you'll need to go through in order to understand what you’re signing up for. Always look within the details for fees and when you might have to pay them.

6. Choose Your Deposit Amount

If you're opening a savings account online or by phone, you should be able to transfer funds with a routing and account number from an existing bank account. If you're opening your account in person, you can use cash or a check. Not all savings accounts require an initial opening deposit, but make sure to read the terms before signing up just in case. 

7. Submit Your Application

If you apply online your account may be fully set up within minutes. However, some banks can take a few days to verify your information. 

Once you get it set up, you may find that a savings account is a great way to save money.

FAQ

Can I open a savings account with bad credit or a ChexSystems flag?

Yes, you can open a savings account with bad credit, since your credit score isn't evaluated when opening an account. However, most banks do review your banking history via ChexSystems, so items such as overdraft fees that went unpaid or closing an account with a negative balance could be seen as red flags. If that's your case, there are second-chance banking accounts available. Also consider banks or credit unions also that don't use ChexSystems as well.

What's the difference between a savings account and a money market account?

Both savings accounts and money market accounts earn interest on your cash. Money market accounts can offer different features, though, such as the ability to write checks or use a debit card. Savings accounts are a bit simpler — you store funds so you can save up for an emergency or something unexpected.

Is there a limit to how many savings accounts I can have?

No, there's no limit to how many savings accounts you can have. You can open several at one bank or at different banks or financial institutions. But it's good to have a system of keeping track of your funds, just in case. You'll want to avoid getting flagged for an inactive account or incur fees just because you weren't aware.

Is my money safe in a savings account?

Yes, your money is generally safe in a savings account. If you bank at an FDIC-insured bank, funds are secured up to $250,000 in case the bank fails. Similarly, at NCUA-insured credit unions, your funds are insured up to $250,000. To limit fraud, bank policies often have safeguards in place as well, if you notice something suspicious happening to your account.

Can I open a savings account for my child or teen?

Yes, you can open a savings account for your child or teen. The steps are similar to opening one for yourself, as you'll need to provide an ID for you and your child, date of birth, address and SSN. You'd be a joint account owner with your child until they turn 18. There are a variety of bank account options specifically designed for kids and teens, along with custodial accounts and accounts for minors, that may offer features such as zero fees and customizable controls for you as a parent.

Do I need to keep a minimum balance to avoid fees?

Each bank and account are different. Some savings and checking accounts don't require a minimum balance to keep the account open. On the other hand, some banks may charge a fee if you don't maintain a minimum. It's good to double-check the fee schedule with your bank.

How long does it take for my money to be available after I fund a new account?

The typical time it takes is approximately one to three business days for ACH transfers, and instant if you have a cash transaction or making a deposit in person.

Key Terms

• Savings account: A deposit account that holds money you don't plan to spend right away and typically earns interest over time.

• Annual percentage yield (APY): The yearly rate of return on your savings, including compound interest. A higher APY means your money grows faster.

• High-yield savings account: A savings account, often from an online bank, that pays a notably higher APY than a traditional branch account.

• Traditional savings account: A basic savings account offered by brick-and-mortar banks and credit unions, usually with easy branch access but lower rates.

• Minimum opening deposit: The amount of money some banks require to open an account, often $0 to $100.

• FDIC insurance: Federal Deposit Insurance Corp. protection that covers bank deposits up to $250,000 per depositor, per bank, per ownership category.

• NCUA share insurance: The credit union equivalent of FDIC coverage, insuring deposits up to $250,000 per member, per credit union, per ownership category.

• ChexSystems: A reporting agency that tracks your banking history, such as unpaid overdrafts, which banks may review when you apply for an account.

Sources

• FDIC — Understanding Deposit Insurance

• NCUA — Share Insurance Coverage

• CFPB — Opening a Checking or Savings Account

• CFPB — Checklist for Opening a Bank or Credit Union Account

Summary generated by AI, verified by MoneyLion editors