Do you have that dream home to build or that dream holiday to go on? But somehow, does money keep vanishing from your account? One of the most basic ways to collect and save your money is to open a savings account. A savings account can be used as a quick go-to emergency fund if ever needed. Saving accounts usually have a good interest rate which increases the principal funds and high transactions fee that discourage withdrawals. You can separate a certain percentage of your income and deposit it in this account. Every bank has two to three saving account packages and you must decide on one.
Rationale: You must identify the reason you are opening a savings account. You could be doing it just to save money, so that every Christmas you could purchase gifts for your family. Perhaps by the end of every year, you realize there is no finance for a vacation which your family had been hoping and planning for a year. Opening a savings account is a great way to save up, whatever your reasons are.
Interest Rates: As a thumb rule, the higher the interest rates, the better the saving account. Yet many savings accounts have high interest rates in beginning of the first few months, but later just revert to a lower rate. Such accounts are more of a promotional gimmick. Find a saving account with an interest rate that will fit into your savings plan. If you have a short term savings goal, then it would be good to go for the promotional account with high interest rates for the first few months. However a long term saving plans requires a strong saving account, where the interest rate would remain stable.
Though most financial institutes advertise interest rates on an annual base, in reality they are calculated on a monthly or weekly base. Make sure you know how your bank calculates this. Also find out how the interest will be applied. Will the higher interest rate be paid on all the money in the account once your savings go above a certain amount or will the higher interest rate be paid only to a portion of your balance that is above a certain amount?
Fees: Most financial institutions avoid charging a monthly fee on maintaining a savings account. However there will most probably be transaction fees. Some saving accounts offer a limited number of free transactions, while others require you to pay a minimum monthly balance. Depending on your needs, you will require a certain number of withdrawals. Hence pick an account that can accommodate your needs for free or low cost.
Access: One of the reasons for having a savings account is so that you have quick access to your finance. Make sure you can easily access your account from automated bank machines.
Taxes: Be aware of what taxes you will have to pay on the interest generated from your savings account.
Terms and Conditions: Make sure you read the terms and conditions carefully before signing on the dotted line while opening your savings account. Completely understand what the savings account is offering.
Remember, it is important to understand your needs for opening a saving account and then decide on the interest rates and fees. Make an informed decision to help your money grow faster.
