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8 things to consider when opening a savings account

Whether you're saving for your child's education, for a vacation, or just for a rainy day, solid saving habits are a stepping stone toward long-term financial health. Knowing how to open a savings account gives you access to one of the most important financial tools you can have.

You can choose the type of savings account that's right for you. Here's how to navigate your options and use your account to its full potential as you bolster your savings.

4 benefits of savings accounts

A savings account is more than just a place to stow away money each month. Think over which benefits you might want to take advantage of.

1. Get better interest rates with savings accounts

Because checking accounts are designed to facilitate your spending, they usually don't provide interest—although some do offer a small amount. In essence, you forfeit some of your interest in exchange for getting more access to your funds.

Savings accounts, on the other hand, will always pay some interest. It's usually a small amount, but the paid interest can be noticeable in the long run.

2. Set boundaries between your spending and savings

A checking account gives you easy access to your money so that you can pull out your debit card and spend it.

You should be able to get to your savings when you need them, but you don't want to regularly dip into your financial reserves. Holding a separate savings account helps you maintain a small barrier between yourself and your savings—at least enough to make you ask, "Do I want to make this purchase more than I want whatever I'm saving for?"

3. Save for bigger items

How do big-ticket items like vacations, high-end electronics, college tuition and home upgrades fit into your regular budget? Saving a small but consistent amount, such as a certain percentage every month, can help you purchase items you wouldn't normally have the spending power to afford.

If you opt to pool that money in a savings account, the interest you'll build can help provide an extra boost to your funds. (However, if you're saving for retirement, a Roth IRA is more likely to suit your needs.)

4. Prepare for rainy days

You can't always anticipate when you'll lose a job, have a major car expense, or run into a significant health care cost. Without savings to lean on, you risk facing financial anxieties and having to turn to high-interest credit solutions. Most financial advisors recommend building an emergency fund large enough to support you for between three and six months.

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8 questions to consider when choosing a savings account

As with any financial decision, it's worth digging into the fine print to see which of your options best fits your needs, savings goals and expectations. A little research ahead of time can save you from a lot of frustration later on—so carefully weigh the features that will make your savings account work for you.

1. Do you need to write checks?

You shouldn't write checks frequently on a savings account, but you might still want the option to do it occasionally. Confirm that your choice of account offers the option—many financial institutions don't allow check-writing privileges on savings accounts. Usually, the check-writing privileges come with lower interest rates, but some money market accounts include both check-writing, ATM access and a debit card.

2. Can you access the account electronically?

If you'll want access to your account on the go, check out mobile options. Ensure that your account's app is easy to use and functional for your needs.

3. How much will it cost to open a savings account?

When you get started, most savings accounts come with a minimum opening deposit ranging from $25-$100. They may also introduce maintenance fees or withdrawal fees as you use the account. The good news is that financial institutions often waive these fees when you maintain a minimum balance or limit your withdrawals per month. Some financial institutions will waive those fees for other factors as well, such as your age, having a linked checking account, or making automatic transfers from other accounts.

4. Do you want an individual or joint account?

If you want a spouse, a parent, a child, or someone else to have access to your account, make sure your account is a joint one. Besides offering greater visibility and access to the funds, a joint account typically provides greater insurance through the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Association (NCUA) than the $250,000 allotted for an individual account.

5. What's the interest rate?

The interest rate for savings accounts is called annual percentage yield (APY). It shows the rate of return you can expect on your account within a year after accounting for compounding interest. Banks are required to display this information when you sign up for an account, so you can easily use this number to compare with other institutions. Note that the APY is a variable rate, so it will change throughout the year based on market conditions.

6. Should you open your savings account at a separate institution?

There are pros and cons to pairing up your checking and savings accounts. When you open a savings account at the same location, you're more likely to lower or eliminate some of your fees. It's also easy to transfer money between accounts—however, this can make the money too convenient to access, working counter to your savings goals.

Opening an account at another institution puts distance between money meant for spending and saving. As you search for the best option for your checking and savings accounts, you may find that some institutions do one or the other more effectively.

7. Does it offer deposit insurance?

Most depository accounts, including savings accounts, are insured by the FDIC (Credit Unions are insured by the NCUA) for up to $250,000 on individual accounts. Be sure to do your research on the level of coverage provided by your financial institution.

8. Can you transfer funds from other institutions?

Particularly if you have a checking account or another depository account at another institution, confirm that you can transfer money between institutions. Otherwise, you may need to go through the extra step of withdrawing money from the first account before depositing it into your savings.

What you'll need to open a savings account

No matter where and how you open your account—in whichever state, with whichever bank, even online—you'll typically need a similar set of documents.

  • Government-issued ID. Some institutions will require two to open an account.
  • An initial deposit. Most accounts require a deposit to get started, but the amount will vary by institution.
  • Your contact information. You'll need to provide basic info like an address and phone number.
  • Taxpayer-identification number. U.S. citizens will have to provide a social security number, while certain noncitizens will need to provide an Individual Taxpayer Identification Number (ITIN).
  • A parent (or co-owner). If you're under 18 years old, a parent or guardian must be present to sign the account documents.
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How to open a savings account online

Opening a savings account in person or over the phone has its benefits: You get dedicated time to ask questions and get to know your local branch. But opening an account online is easier than ever, and going the digital route may even help you tap into a better interest rate.

  1. Gather all of your identification documents. Typically, you'll be able to upload or email documents to the institution during the application process.
  2. Go to the institution's website. Look for phrases like "Open Account."
  3. Choose the type of account you want. You'll have a chance to confirm that you want a savings account and specify whether it will be single or joint.
  4. Finish the rest of the application with your personal information. Most banks have a short online application process. Look for a phone number just in case you have additional questions.

Ready to start saving money? Connect with a local Thrivent financial advisor who can help you manage your money for the future. And learn more about the exceptional savings account options through Thrivent Credit Union.

Deposit and lending services are offered by Thrivent Credit Union, the marketing name for Thrivent Federal Credit Union, a member-owned not-for-profit financial cooperative that is federally insured by the National Credit Union Administration and doing business in accordance with the Federal Fair Lending Laws. Insurance, securities, investment advisory and trust and investment management accounts and services offered by Thrivent, the marketing name for Thrivent Financial for Lutherans, or its affiliates are not deposits or obligations of Thrivent Federal Credit Union, are not guaranteed by Thrivent Federal Credit Union or any bank, are not insured by the NCUA, FDIC or any other federal government agency, and involve investment risk, including possible loss of the principal amount invested. Must qualify for membership in TCU.