A savings account is an essential feature provided by banks that lets you hold your money securely while earning interest on it. It ensures savings post monthly bill payment and can be a nest egg in the case of future emergencies. It can also help individuals meet financial goals. But, just depositing money in the account might not be enough. This article answers some FAQs on savings accounts and discusses top tips to optimize them.

New savings accounts and the frequently asked questions

Who can open a savings account?
Absolutely anyone who wants to save money for future financial goals, emergency funds, or college funds. However, the minimum age for opening a savings account is 18 years.

Can minors have a savings account?
Yes, but instead of them, the parents or the legal guardian has to sign as a co-owner on every form of the bank.

How to open a new savings account?
Use your identification ID or security number to open an account with the bank. Once the paperwork is approved, deposit the minimum amount, after which the bank activates the account. The minimum balance required is approximately $25 to $100.

How does one know which bank to opt for?
Find out the interest rate of all the potential banks you’d like to open an account with and study their fluctuation rate over the last five years. The bank with the best interest rate and security should be opted for. The average interest rate of any savings account should approximately be 0.06%.

What affects the interest rate of a savings bank account?
Economic factors and federal and government policies affect the interest rates of a savings account.

How many savings accounts can an individual have?
While there is no limit to the number of accounts one individual can open, there may be a limit to opening multiple accounts in the same bank. Also, check the limit of withdrawals from your specific bank to avoid penalties and fines.

Can a savings account be closed and how?
Yes, you can close a savings account by first transferring all the funds to your other active bank account or withdrawing them. Then, you must submit the requested documents to the bank and keep a copy of them yourself.

Tips on how to optimize your savings account

Check which bank lets you earn more interest
Invest in accounts that earn you more interest rates. You may have to take help from a financial advisor or a bank representative. To earn more interest on savings, you may have to agree to a fixed locking period. The longer the locking period, the more you may earn interest. Do look into the risks and terms and conditions before agreeing to any savings scheme.

Have an emergency fund
Besides locking your savings, it’s always a good idea to keep some liquid cash available for emergencies. Fixed deposits and other deposits that may need a few working days to get your cash could pose a problem when you may need instant cash.

Change your saving strategy with age
One’s priorities in their 20s are different from their 30s and 40s. It’s a known fact that with age, the savings account must also evolve. In your 20s, you may need a savings account to pay college debts, and your 30s may be to pay home loans, and eventually you might need one to prepare for retirement. A savings account can generate a second source of income in the form of interest and can be useful in the future as pension money.

Check out a time deposit account
This is one account that enables us to maximize our savings. It is the fastest way to multiply your savings, and while it may require a locking period, the principal amount on maturity can be withdrawn with compound interest.

Develop a habit to reward yourself
To reach a good principal amount in a savings account, you may start by paying a percent of your paycheck to yourself. Consider it a reward, and this way, you can deposit money into your savings account every month without thinking of it as a financial burden. The ideal way would be to deposit a chunk before spending on utilities as it can get difficult to track funds otherwise.

These simple steps can motivate you to start saving and develop a sizable fund over the years. This habit, over a period of time, can help you buy something substantial like a car, home, or meet your financial goals at a certain age. Keeping an age-oriented financial goal will helps you reach financial milestones quicker.