How to open a savings account in 7 simple steps

Meeting financial goals begins by organizing finances with various bank accounts. For example, a checking account allows you to store your cash and easily access it with checks or a debit card. Another helpful type of account is a savings account, which provides a separate account to put your savings in.

If savings accounts sound appealing to you, you’re likely wondering how to open one. Below, we’ll cover all of the steps when opening a savings account and why starting one is a great idea. 

Why is a savings account important?

Opening a savings account is one of the initial steps toward building a solid personal finance foundation. Even if you already have a checking account, a savings account serves as a secure way to store money going toward a financial goal while accruing interest. A savings account is also beneficial as a first account — even if you have no checking account — because it helps you get accustomed to banking and the rules behind it without needing to track debit card purchases. But how exactly do you open a savings account?

How to open a savings account

Opening a savings account is relatively simple and requires only a handful of steps and basic paperwork to complete. Let’s review how to open a savings account. 

1. Decide how and where to apply.

Before you can start opening your savings account, you must decide how you want to apply for the account. You have several options, including in person at the bank or credit union, over the phone, or online. Each method has its own benefits and drawbacks.

For example, applying in person is less convenient than online or over the phone, but you get face-to-face time with a bank employee to ask questions. Plus, this is a more secure way to open an account, removing the risk of a hacker intercepting your information. An online savings account application is super convenient and often gets you immediate approval, but you may have unanswered questions, and you must transmit sensitive personal data electronically. You can mitigate some of this risk by checking to make sure your information will be submitted securely with encryption. 

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2. Get all of your information together.

Next, you must gather all of the information the bank will need to verify your identity and approve your account. This can include your Social Security number, identification (driver’s license, passport, or state ID), address, and employment information. Each bank may have different requirements, so if you plan to apply in person or over the phone, you may want to contact them for a list of info you need before starting the process.

If you’re under 18, you’ll likely need a parent or guardian to open the bank account with you, so you may have to get this information from them.

3. Choose the type of savings account you want.

Review the bank’s savings account options and features to find the choice that suits you. There are a few important factors to consider at this stage. Make sure you learn the account’s annual percentage yield (APY) or interest rate, the minimum balance requirement, minimum opening deposit, monthly maintenance fees, and whether it offers online banking and mobile banking.

Some banks may offer a great APY, but a large portion of this is eliminated by higher monthly maintenance fees. Also, you may find an account that seems perfect for you, only to learn it has a high minimum account balance requirement and charges big fees for falling below that line.

Some examples of available savings accounts your bank may offer include:

• Traditional savings account: A standard savings account with interest rates generally set at a fraction of a percent. As of June 2023, the average APY from a traditional savings account is 0.40%.

• High-yield savings account (HYSA): A savings account with a higher interest rate than a traditional one. As of June 2023, some of the higher-APY HYSAs offer 4 to 5% APY.

• Money market account: Essentially a hybrid checking account and savings account, as it bears interest like a savings account — albeit typically at a lower rate than a savings account — but allows you to access your cash with debit card withdrawals or checks. As of June 2023, the average interest rate for a money market account is 0.23%.

• Certificate of deposit (CD): A time-based savings account that offers a certain interest rate — typically higher than a traditional savings account — if you leave the cash untouched in the account for a certain amount of time. The time frames are typically from a few months to up to five years. The APY will vary by the time commitment and minimum deposit.

4. Complete the application and agree to the bank’s terms and conditions.

With the pre-application legwork done, you’re ready to finish the application — or have your parent or guardian finish it. The application will request a range of personal and contact information, such as name, address, phone number, date of birth, Social Security number, driver’s license number, employer, and more.

Once you or your guardian complete this information, the financial institution will show you the terms and conditions. Here, you’ll read the fee disclosures, the interest rate or APY and how it’s calculated, and more. If all looks good, agree to the terms and submit the application.

5. Wait on the bank’s decision.

Now you wait to see whether the bank approves your account. In many cases, a bank can immediately decide on your eligibility — approved or denied — but it sometimes needs a few days to verify your information. The bank will review your paperwork and banking history to check for any suspected fraud or other banking issues, such as negative balances on other accounts. If you have no negative records, this stage is more of a verification. 

Either way, you’ll soon know what the decision is.

6. Fund your account.

Once the bank approves you, you’re ready to make an initial deposit into your new account. Some banks require no account opening deposit, but most still require a small deposit upon opening — typically $25 to $100. The bank will alert you of this required deposit in the terms and conditions so it won’t be a surprise.

7. Enroll in online banking and download the mobile app.

With your account now set up, you may still need to enroll in online banking to easily view your account balance, set up automatic transfers, and more. It’s also a good idea to download the bank’s mobile app if it has one, so you can access your account while on the move.

What perks does a savings account offer?

Opening a savings account as a first account or along with your checking account is helpful in many ways, from accrued interest to keeping cash secure. Let’s review some of the more important benefits of having a savings account.

Higher APY

Savings accounts often have higher APY than a checking account. As of June 2023, the average savings account APY is 0.40%, while the average checking account APY is just 0.07%. And if you opt for a HYSA or CD, you’ll get an even higher APY. This opens the door to earning more money just by leaving cash in your account.

These accounts offer compound interest, meaning you will earn interest on previously earned interest. For example, if you have $100 in your account and earn $2 in interest one month, the next month’s interest will be calculated from the new $102 balance.

This is why putting your emergency fund into a HYSA is so beneficial. Because you plan to use that cash only when an emergency strikes, you have lots of time to earn compounding interest.

Keeps cash separate

When you set your savings goals, you want to be able to see your progress. Having a separate savings account lets your balance grow as you move closer to your financial goal. Also, keeping the cash in a separate savings account prevents you from accidentally spending money you had intended to save.

Automates your savings

Having a separate savings account also allows you to automate your savings so you can reach your financial goals without extra effort. Many financial institutions will let you set up automatic online transfers between your checking account and savings account. So, you can set up an automatic monthly transfer and be confident that you’ll stay on track on your savings goals.

Also, if you have direct deposit, many payroll providers will allow you to split the deposit between multiple accounts. This way, you can automatically earmark the percentage you want to go directly into your savings account, putting that money safely out of sight and out of mind.

Your cash is insured

Because account growth is a key part of a savings account, you may think it’s better to stick with a brokerage account and invest in the stock market, given its average historical returns are around 10%. While a brokerage account is a great way to reach your personal finance goals, you also risk losing money if the market crashes. 

The stock market also has the risk of sudden ups and downs due to market fluctuations. For this reason, it’s recommended to use investing for long-term goals. If you need the money sooner, you’re less resistant to the ups and downs. You can then use your savings account for short-term goals.

Good news, though: When you choose a savings account at an FDIC-insured bank, eligible deposits are insured up to $250,000 through the Federal Deposit Insurance Corporation (FDIC).

As you learn about investing, you can balance investing in stocks, bonds, and exchange-traded funds (ETFs) and placing cash in a high-interest savings account.

Opening a savings account is key to meeting financial goals.

Now that you understand how to open a savings account, you’re ready to make the leap and start saving. Opening a savings account is a big step toward meeting your savings goals, as it gives you a separate, interest-bearing account to tuck away the cash you want to save. Whether you’re saving for an emergency fund, your first car, college, or something else, a savings account shows your commitment to the process. For longer-term goals, like retirement, investing in the stock market may be a solid option, depending on the time horizon.

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