Savings Account - The Why and How's

Should You Get a Savings Account?

In a word, yes.

A savings account can be a good incentive for proper financial planning by encouraging you to save money. If you're not saving money so already, you need to start real soon, because this is your only solid way towards financial independence (a topic for a hub in its own right... coming soon to a screen near you!)

A savings account differs from a checking account in that you have a limited number of withdrawals available to you per month. What's more, in many cases, these withdrawals are more costly as they incur some sort of a withdrawal penalty. At the very least, they are not as easy to perform.

It's not all bad though! A savings account doesn't just make it harder for you to withdraw money. It also yields you some revenue by paying interest on your money. In essence, you are allowing the bank to use your money and charge them for it. How cool is that? Loaning money to the bank and making money from them for a change?

Savings Accounts - Shop Around

Many banks offer savings accounts, so you really should shop around. Read up about the topic (this hub is a good start, but don't stop here!) and compare offers by leading banks.

Don't just check your own bank - cast a wider net and cast it on the net too. Yes, you can get an online savings account. In fact online banks are known for giving some good terms and relatively high interest.

Here are the three main criteria by which you should evaluate a savings account:

APY - Annual Percentage Yield also known as just "Yield" is the first criterion by which most people judge a savings account. Basically, this is your yearly interest rate. With most savings accounts it is calculated daily, so that interest that you earned today will begin accruing its own interest tomorrow. Because the banks are always trying to lure in new customers, they compete with each other with higher APY's. At the time of writing, these rates vary anywhere between 2% to 4% of APY. They may opt to offer a higher interest rate to accounts with a higher minimum balance.

Minimum Balance - Some bank require a minimum balance just to open an account. It may be as low as a single dollar. Others will let you open an account, but won't pay you any interest until you reach a certain minimum balance.

Account Fees - Many savings accounts come with no fees, or otherwise have minimal monthly fees. Check for fees to open the account, as well as monthly fees down the road, and other services for which you may be charged. Unveil those hidden fees in due time so that you can compare more accurately. Check for discounts too. Some banks offer lower fees, or even no fees, for children and senior citizens.

Once you found an account that seems right for you, take more time to read the fine print. Examine the process needed to open the account and the criteria used by the bank, to see if you are even eligible.See if there are any restrictions on deposits (not likely) or withdrawals (more likely). Check the procedures too and if you're interested, look into online services. Some banks offer accounts that are managed online exclusively, and you may or may not be interested in this option.

Do your homework so that you get the savings account that's right for you and start saving towards your financial independence.