How to open a savings account: A step-by-step guide

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Whether saving for a rainy day, a big purchase, or retirement, a savings account provides a secure and accessible place to store and grow your money. It’s an important step to building a strong financial foundation and reaching your savings goals.

Here’s a step-by-step guide on opening a savings account, including how to pick the best account for you and what you’ll need to get started. 

6 steps to opening a savings account 

Opening a savings account is generally straightforward, but there are certain steps you’ll need to take. Here’s how to do it:

1. Determine your savings goals

Before opening a savings account, it's important to establish your savings goals. Ask yourself: What am I saving for? How much do I need to save? How long will it take me to reach my goal? Having clear objectives will help you choose the right type of savings account and create a realistic savings plan.

2. Research and compare banks or credit unions

Once you have a clear idea of your savings goals, research various banks and credit unions to find the best fit for your needs. Consider what features are most important to you — like interest rates, fees, or minimum balance requirements.

You may also want to weigh the pros and cons of online banks versus traditional banks. For example, online banks may have higher rates but not offer in-person services like traditional banks.

3. Choose the right type of savings account

Several types of savings accounts are available, each with its features and benefits. Some common options include:

• Traditional savings accounts are the most basic type of account, often offered by brick-and-mortar banks and credit unions. While you may get some perks like access to physical branches, these accounts typically offer low interest. 
• High-yield savings accounts often offer higher interest rates, allowing your money to grow faster. They may have higher minimum balance requirements or be available only through online banks.
• Money market accounts combine the features of savings and checking accounts, often offering check-writing abilities and higher interest rates. They usually have higher minimum balance requirements than traditional savings accounts.
• Certificates of deposit (CDs) offer a fixed interest rate for a set term (ex., 6 months, 1 year, 5 years). They typically offer higher interest rates than other savings accounts but require you to lock in your funds for the specified term.

4. Gather the required documents

To open a savings account, you must provide certain documents and information. Requirements may vary by bank, but generally, you'll need:

• A valid government-issued ID (like a driver's license or passport)
• Your Social Security Number or Individual Taxpayer Identification Number (ITIN)
• Proof of address (like a utility bill or lease agreement)
• Initial deposit (amount varies by bank and account type)

5. Apply for the account 

Once you have all the necessary information, you can open your account. Many banks have a simple online application that takes only a few minutes. However, if applying with a traditional bank or credit union, you can also apply in person. In either case, you’ll need to provide basic information, like your name, date of birth, address, and phone number. 

Once you apply, the bank or credit union will tell you within minutes if you’ve been approved or not. 

6. Fund your account

It typically only takes a few minutes to open your account. Once your application is approved, you must deposit to fund your new savings account. You can do this by transferring money from another bank account, depositing a check, or depositing cash at a branch.

Consider setting up automatic transfers from your checking account to your new savings account. Many banks allow you to schedule recurring transfers, which can help you build your savings without remembering to make manual deposits.

Why open a savings account?

Separates savings from everyday spending money

Savings accounts separate your savings from the money you spend on everyday essentials. By keeping your savings apart from your checking account, you can stay focused on your financial goals and avoid overspending. 

Most experts recommend saving 10%-20% of your income. Opening a savings account can help you get closer to that range.

Helps you build an emergency fund 

A savings account is ideal for building an emergency fund, which can help you weather unexpected expenses or financial setbacks. An emergency fund can also help you avoid relying on costly forms of borrowing, like credit cards.

Savings accounts are also pretty accessible, letting you access your money in a pinch.

“An emergency fund is your insurance against the ‘what-ifs’ of life and provides a buffer from any unexpected costs or issues,” said Stephen Kates, a certified financial planner at Annuity.org. “When you have a pool of money you can easily draw from, you don’t have to worry about going into debt from a broken water heater or a set of new tires.”

Earns interest on your money

The benefits of a savings account aren’t just psychological. Unlike checking accounts, savings accounts typically earn interest on your balance. This means your money can grow over time, thanks to compound interest.

High-yield savings accounts especially earn more interest, often outpacing inflation. The best high-yield savings accounts right now earn 5.00% APY. While rates on these accounts are often variable, they can still help your money grow more quickly. 

Provides a safe place to store your money

Savings accounts are a low-risk option for storing your money. They are usually FDIC-insured or NCUA-insured (for credit unions) for $250,000 per person per account.

This makes savings accounts a safe place to keep money for short-term and long-term financial goals, whether paying down debt or saving for a down payment on a home.

Factors to consider when picking a savings account

There are several factors to consider when deciding on the best savings account for you. While it’s easy to just focus on rates, you may want to also review things like fees and balance requirements.

• Interest rates: Interest rates vary widely, with some accounts paying a fraction of a percent and others paying 5% or more. Look for accounts that balance high interest rates with the accessibility you need.
• Minimum balance requirements: Some accounts require $0 to open an account, while some may require $500 or more. Other accounts require a certain minimum to earn the highest APY.
• Fees: Some accounts have monthly maintenance fees, especially if you don’t meet the minimum balance requirements. Others may have withdrawal fees. If you’ll regularly need to access the money in your savings account, reviewing the terms is important. 
• Online and mobile banking features: Consider how convenient it is to manage your money online or through an app. This is important for online banks that don’t have physical branch locations. You may prefer specific banking features, like mobile wallets or peer-to-peer payments.
• FDIC or NCUA insurance: These policies insure your money, typically up to $250,000 per person per account. Use the FDIC’s BankFind tool to locate FDIC-insured banks and the NCUA’s credit union locator to find NCUA-insured credit unions.

Tips for maximizing your savings account

Once your savings account is open, it’s important to take a few additional steps to maximize your account and reach your savings goals faster. 

First, schedule recurring transfers to your savings account to make saving a habit. For example, you can allocate 10% to 20% of every paycheck to savings. 

Use your bank's online tools or a budgeting app to set specific savings goals and track your progress over time. Some accounts offer features like savings buckets or round-up programs to help you save more easily.

“As you advance financially and grow your savings, you can use your account as a staging ground for other investments into retirement accounts, stocks, or funds while always keeping a safety net within reach,” says Kates.

Periodically review your savings account to make sure you're still earning a competitive interest rate and avoiding unnecessary fees. Don't be afraid to switch accounts if you find a better deal elsewhere.

Frequently asked questions about savings accounts

The bottom line 

Saving money isn’t always easy, but opening a savings account is a great first step toward making your savings dreams a reality.

Remember to choose an account that aligns with your needs, offering competitive interest rates, low fees, and convenient features. By following this step-by-step process, you can make steady progress toward your savings goals.

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.