How to Open a Savings Account

How to Open a Savings Account - up close picture of glass jar labelled car with cash inside sitting on bed of coins with toy car

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You’ve likely heard the advice “save for a rainy day”. Well, it’s raining. But if you haven’t been saving, don’t fret. You can get started in minutes thanks to the convenience of online banking and electronic fund transfers. All you need is a savings account.

If you’ve gazed across the sea of savings account options, you might find yourself in a state of analysis paralysis. If so, you’re in the right place. I’ll share the nuts and bolts of opening a savings account and walk you through the right steps.

Benefits of Having a Savings Account

Having a savings account is a great way to set liquid funds aside for emergencies, plan for large purchases, and stash extra cash that you might not have plans for just yet. When you have a savings account, you become a lender. Banks borrow your funds and offer an interest rate as your return on their investments.

Consider selecting a FDIC member bank, where your savings account funds are protected up to $250,000 per account holder, per bank. If you choose to open a savings account with a credit union, make sure it is NCUSIF-insured. Like the FDIC, the NCUSIF (National Credit Union Share Insurance Fund) also insures your money up to $250,000. Having a savings account can offer more growth and stability than keeping your money in a locked box under the bed.

Types of Savings Accounts

You have a wealth of options when it comes to opening a savings . Some types of savings accounts include:

  • Traditional Savings — A simple, straightforward savings account.
  • High-Yield Savings — A savings account that offers an annual percentage yield that is higher than the national average.
  • Rewards Savings — A savings account that offers additional rewards or perks based on meeting certain conditions.
  • Tiered Savings — A savings account structure that pays different interest rates based on the amount of funds in the account.

We’ll focus on traditional and high-yield savings accounts in this piece, though there are plenty of other ways to save money with low risk.

Our Top Picks for a New Savings Account

High-Yield Savings vs. Traditional Savings

Traditional savings accounts are often offered by brick-and-mortar banks and generally have lower interest rates than high-yield savings accounts, which are mostly offered by online banks. Online banks have less overhead and can therefore pass on those savings by offering attractive interest rates that can beat the national average many times over. The national average for interest rates fluctuates, but online savings accounts often provide rates 15x to 20x more than the national average.

The best high-yield savings accounts offer no fees, online banking and mobile apps for account management, and interest rates far above the national average. Some will come with no minimum balance requirements or opening deposit minimums.

While we’re generally fans of online savings accounts, there are certain situations in which having a brick-and-mortar bank to visit can be helpful. Analyze the results you’d like to get to chose the right type of savings account for your goals.

How a Savings Account Works

Savings accounts are primarily offered by banks and credit unions, though you can also find them through some credit issuers such as American Express and investment companies such as Betterment. You can deposit money into a savings account and earn money on your balance based on the APY offered by the financial institution. The APY will vary, so it’s smart to shop around for the best rate.

A banks may offer one or more of the following:

  • Simple Interest — This is money earned on the principal balance. The principal balance is what you deposit into your savings account.
  • Compound Interest — Provides a return on the principal as well as any interest you’ve earned on the principal.
  • Fixed Interest — This is an interest rate that does not change.
  • Variable Interest — This is an interest rate that fluctuates.

Each month, you’ll be able to see how much interest you’ve earned in your savings account.

Things to Watch Out For

How could saving money ever be bad, right? While it’s true that saving money is a smart choice, if you don’t open the right savings account, you could lose money on fees. When choosing your account, consider the impact of inflation, account fees, and whether the APY is at, below, or over the national average.

Plus, if you like to move money around frequently, you’re only permitted six transactions per month with a savings account. So be sure you’re opening the right kind of account for your situation.

Editor’s Note: As of April 2020, the Federal Reserve removed the requirement limiting savings accounts to six transactions per month. However, some banks and high-yield savings accounts may still have transaction limits. It is important to understand the rules of your specific account in order to avoid fees and/or penalties assessed by your bank.

How to Apply for a Savings Account

Before you fill opening a savings account, be sure to research what’s available and what fits your situation and goals. A good place to start is your current bank. Your bank might offer attractive rates based on your relationship, but it also serves as a starting ground for comparisons.

Study the interest rate structure. Know the minimum amount to open an account and have a solid understanding of balance requirements and account fees.

Once you’ve decided on where to open your savings account, here’s how to get set up.


Whether applying online or in person, you’ll need to gather your contact and identification information to set up your account. Expect to provide your full name, address, phone number, Social Security number (SSN), and identification such as a driver’s license or other state-issued ID.

You can typically complete an online application 15 minutes or less, although an in-person appointment could take longer. Be prepared to upload documents if setting up an online account. You can scan the required IDs or take pictures with your phone and save them as image files.


Read and understand the terms and conditions of using the savings account. This is where you will learn about how the account functions, interest rate calculations, fees, and all other pertinent information. Understanding this data is essential so that you know what to expect and how to navigate your account. If you have questions, ask them before accepting the terms and conditions.


If there is a minimum amount to fund the account, you can start with that as your initial deposit. If you are applying online, you can link to another bank account as the funding source by providing the routing and account number. Some accounts will do a test deposit to verify the funding source and require you to verify the amount in order to set up the linked account. If you’re applying in person, you can provide a paper check or cash.


If you’d like to manage your account online, you will need to make sure you are registered for an online account and the associated banking app. It’s also a good idea to sign up for alerts so you can monitor account activity.


After opening a savings account, you can choose beneficiaries for your account to avoid your funds being tied up in lengthy probate proceedings. It’s also good to communicate this with your beneficiaries. Also address how you want things handled in your estate plan.


Many accounts will have a feature for you to set up automatic deposits from one or more banks so that you can automate your savings. Choose a frequency that works best for you, but try to have at least one monthly deposit so your savings account will grow.

Final Thoughts: Opening a Savings Account

Opening a savings account with a high interest rate and no fees is a great way to grow money for your future. It’s also a good option for storing your emergency funds or any other liquid cash not designated for monthly expenses or investments.

Keep in mind that if you have other financial accounts in poor standing, your request to open a savings account might be denied. If that’s the case, your best bet is to get your personal finances in order so that you can move forward and build a solid financial foundation.

Do you currently have a savings account? If so, how do you use it? Let us know in the comments!

How to Open a Savings Account Pin - picture of glass jar labelled car with cash inside sitting on bed of coins with toy car

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