5 Reasons You Should Open a Savings Account

While a savings account might not seem important, it can be just what you need to secure your future. Opening a savings account offers many benefits that can improve your financial well-being and be part of your strategy toward better money management and security for you and your family. From building a safety net and earning interest to making your financial dreams a reality, a savings account can help.

1. Financial Safety Net
   
   As everyone knows, life can be unpredictable. Having an emergency fund is critical to weathering financial storms, which can be anything from buying a new tire to more significant expenses like medical bills or losing your job. Knowing you have a financial safety net can provide peace of mind, and by setting aside some of your income, you can build savings over time to help you avoid debt and better manage unavoidable situations. Even $10 a month adds up over time, the main thing is just to get started and be consistent.
2. Earn Interest on Your Savings
   
   By having your money in a savings account, you'll earn interest, so your money grows even faster over time. Interest rates vary across financial institutions and savings account types (for example, money market accounts offer higher interest rates than traditional savings accounts), but having your money in a savings account means your money is working for you. Even a low interest rate helps, and you'll earn even more as your balance grows.
3. Keep Your Savings Safe
   
   Compared to keeping a hidden piggy bank in your house, depositing your money into a savings account means your money stays safe. Accidents (and nosey kids) are just a fact of life, but you don't want to risk your hard-earned savings disappearing. Money in a bank account is federally insured up to the federal limit. It is not at risk of being lost or stolen the way cash is; you know exactly where it is and how to access it if needed. You can use the FDIC's calculator to see if all of your savings are insured.
4. Separate Spending Money from Savings
   
   This is probably the most significant advantage of having a savings account. It helps you avoid the temptation to spend so you can budget better since you can track progress toward your goals and save for the intended purpose. Plus, you won't spend your savings accidentally since they are not in the same account.
5. Meet Your Financial Goals
   
   A savings account is a safe place for planned purchases, like a down payment for a house, car, tuition, or whatever else you have in mind for your future. Regularly saving every month is critical; even small amounts add up over time and will contribute toward your goals. Many banks also offer automatic transfers and other features to help you stay on track and watch your progress. If you're better about saving when you can't see the money in your online banking, you can also ask your bank about hiding the account so you can still access it if you need to, but the account won't be listed inside online banking. Out of sight, out of mind (and better saving habits!).

Is There a Downside to Having a Savings Account

The only downside might be a monthly fee for having your savings account, if applicable. Some banks do have monthly maintenance fees, but many offer ways to avoid those fees so you can have the account for free. Check with your bank to find out what those requirements are, but generally, it's just having a minimum balance in the account or in related accounts (like your checking or other savings accounts).

Should I Open a Savings Account

If you're asking yourself if opening a savings account is worth it, the answer is yes! Savings accounts are a great tool to help you make your financial goals a reality, especially since you can't accidentally overspend that money (unless you have your savings set up as overdraft protection for your checking account) and when you log in to your banking app you probably have the option to nickname the account so you can help hold yourself accountable for your goals.

What to Know Before Opening a Savings Account

There are a few things to keep in mind before you choose your account. APY stands for Annual Percentage Yield and is the percentage of your balance you'll receive as interest each year. The higher the APY, the more money you will earn over time. There may also be a monthly maintenance fee to have the account, but most of the time, there are ways to get the fee waived, like having a minimum balance. This fee should be clearly listed on the bank's website so you can compare accounts. There are also account opening requirements (more below), but you'll mostly want to pay attention to the required initial deposit to open the account, which is $25 at most banks.

Lastly, you may have heard that you can only make six withdrawals from a savings account each month before you'll start getting charged fees for taking your money out. It was initially designed to encourage people to save and keep money in their savings accounts, but this is no longer a federal law, so you don't have to worry about limiting transactions!

What is Needed to Open a Savings Account

You'll need the same information to open a savings account as you did to open your checking account. It varies depending on where you open your accounts, but generally you'll need to provide:

• Your license or other federal ID
• Your Social Security number or other tax ID
• Address
• Contact information
• An initial deposit to open the account; this is usually about $25
• A source to fund the account, whether that's cash or using a debit card or account information from a different bank

WaFd Bank is Here to Help

No question is too small for our friendly bankers! With WaFd Bank, you have access to tools and services to help you manage your finances and get the most from your money. Visit us at your neighborhood branch, give us a call at 800-324-9375, or check out what WaFd online banking has to offer.