Unlocking Your Savings: Reading Investment Statements

A savings account is a safe place to keep your money and start preparing for your financial future. They are offered by almost every bank and credit union in the U.S. and can help you grow your savings through the interest they pay. Opening a savings account can be done online or in person and usually takes several steps. Here is a step-by-step guide to opening a savings investment account and getting started on your financial journey.

Compare savings account options

When comparing savings account options, there are several factors to consider. Firstly, look for accounts with competitive annual percentage yields (APY). A higher APY will result in faster growth of your savings over time. It is also important to consider any fees associated with the account, such as monthly maintenance fees, early account closure fees, and wire transfer fees. Accessibility is another key factor; compare the accessibility of fee-free ATMs and branches, especially if you prefer to do your banking in person. Additionally, some accounts may have minimum balance requirements or limits on the number of withdrawals allowed, so be sure to review these details before making a decision. Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA) insurance coverage is also an important feature to look out for.

• EverBank Performance Savings Account: This account offers a highly competitive yield of 5.05% APY with no minimum deposit requirement. It also provides $15 in ATM fee reimbursements for out-of-network withdrawals. However, EverBank only has financial centers in Florida, so savers outside the state won't have access to physical branches.
• Capital One 360 Performance Savings Account: With a yield of 4.00% APY, this account offers the ability to bank in person and has over 70,000 ATMs accessible through the Allpoint and MoneyPass networks. There are no monthly maintenance fees, and you can take advantage of mobile check deposit. However, there are no ATM fee reimbursements, and outgoing domestic wire transfers cost $30.
• Marcus by Goldman Sachs High-Yield Online Savings Account: This account offers a solid yield of 4.10% APY with no maintenance fees or minimum deposit requirements. Marcus also provides 24/7 customer service and has received high customer satisfaction ratings. However, there is no access to ATMs, so it may not be the most convenient option if you need to withdraw cash frequently.
• Varo Savings Account: The Varo Savings Account offers an impressive yield of 3.00% to 5.00% APY on balances up to $5,000 if you receive $1,000 in qualifying deposits in a given month. There are no fees or minimum balance requirements, and it offers useful savings features like "Save Your Change" and "Save Your Pay." However, the 5.00% APY only applies to the first $5,000 in your account, and you must open and use a Varo Bank account to take advantage of the savings features.
• UFB Portfolio Savings: UFB Portfolio Savings offers a high APY of up to 4.57% with no minimum balance or deposit requirements. It provides access to over 91,000 fee-free ATMs and 24/7 customer support through a virtual assistant or their customer service team. However, you are limited to six free withdrawals per month, with each additional withdrawal incurring a $10 fee.

Gather required documents

To open a savings account, you'll need to provide some personal information and documentation. Here's a list of the documents you'll typically need to gather:

• Identification: You'll need to provide a government-issued ID, such as a driver's license, passport, or other photo ID. This is required to verify your identity.
• Social Security Number (SSN): Your SSN is necessary because the interest earned on your savings account is considered taxable income. The financial institution will report this information to the IRS.
• Contact Information: Along with your ID, you'll need to provide your full name, phone number, and address. Some institutions may also ask for your email address and date of birth.
• Proof of Address: If your ID doesn't have your current address, you may need to provide proof of address, such as a recent utility bill or bank statement.
• Bank Account Information (optional): If you plan to fund your new savings account with money from an existing bank account, you'll need the account information for the external account. This could include the account number and routing number.

It's a good idea to have these documents readily available when you're filling out the application, whether you're applying online or in person. Additionally, if you're opening a joint account with another person, they will also need to provide their personal information and documentation.

Choose account type

Choosing the right type of savings account depends on your financial needs and goals. Here are some of the most common types of savings accounts:

Traditional or Regular Savings Account

Traditional savings accounts are offered by most banks and credit unions and allow you to earn interest on your money, typically at a lower rate compared to other savings options. They usually have low minimum deposit requirements and provide easy access to your funds through online banking, mobile banking, phone, or in-person at a branch. Federal Deposit Insurance Corporation (FDIC) insurance covers deposits up to $250,000 per depositor, while the National Credit Union Administration (NCUA) provides similar insurance for credit unions.

High-Yield Savings Account

High-yield savings accounts are offered by online banks, neobanks, and online credit unions, providing a higher annual percentage yield (APY) than regular savings accounts. They often have lower minimum deposit requirements and typically don't charge monthly maintenance fees. However, they may not offer branch banking access for depositing cash directly.

Money Market Accounts (MMAs)

MMAs combine features of both savings and checking accounts, offering higher interest rates than regular savings accounts. They provide more options for accessing your money, such as writing checks or using a debit or ATM card. However, there may be limits on the number of transactions per month, and higher minimum deposit requirements may apply.

Certificates of Deposit (CDs)

CDs are time deposits where you agree to leave your money in the account for a fixed period, during which it earns interest. They offer above-average interest rates, and there are usually no monthly maintenance fees. However, withdrawing money before the maturity date may result in early withdrawal penalties.

Cash Management Account

Cash management accounts are offered by online brokerages and robo-advisor platforms and are designed for holding cash that you plan to invest. They often provide higher interest rates than traditional banks and may offer features similar to checking accounts, such as writing checks or transferring funds. However, they may not have branch banking access and may not always be covered by FDIC insurance.

Specialty Savings Account

Specialty savings accounts are tailored to specific savings goals or types of individuals, such as minors, students, or those saving for retirement, healthcare, or holiday shopping. They usually have low or no maintenance fees but may have restrictions on who can use them and when withdrawals can be made. Interest rates on specialty savings accounts may be lower compared to high-yield savings accounts.

Prepare initial deposit

To prepare your initial deposit, you'll need to determine the minimum amount of money required to open your chosen savings or investment account. This is known as the minimum deposit or initial deposit. The amount can vary depending on the type of account and the financial institution. For example, opening a bank savings account typically requires a minimum initial deposit of $50, while investing in stocks or a certificate of deposit (CD) may require a minimum of $500. Mutual funds often require a higher initial deposit of around $1,000, and retirement accounts may require a minimum of $2,500.

It's important to note that higher minimum deposits are usually associated with accounts offering premium services, while products aimed at a broader audience tend to have lower minimum deposit requirements. Some financial institutions may even waive the minimum deposit requirement to attract new customers.

When preparing your initial deposit, consider the following:

• Compare your options: Research different financial institutions to find the best rates, fees, and account features that align with your goals.
• Determine the minimum deposit: Identify the minimum amount required to open your desired account. This information should be readily available from the financial institution.
• Gather the necessary funds: Ensure you have the required amount of money available to make the initial deposit. You may need to transfer funds from an existing account, use savings, or allocate money from your budget.
• Understand the benefits and limitations: Keep in mind that an initial deposit can provide easier access to funds, potentially increase your return on investment, and offer greater financial security. However, it may also limit your access to certain investment opportunities or restrict the number of withdrawals you can make.
• Plan for ongoing contributions: Consider setting up automatic transfers or allocating a portion of your income to regularly contribute to your savings or investment account. This will help you build your portfolio over time.

Submit application

Once you have chosen the savings account that best suits your needs, it's time to submit your application. This can usually be done online, but some institutions may require you to apply in person, by phone, or via mail. The application process typically involves providing personal information, such as your name, address, date of birth, government-issued identification number, and a photo.

Choose your application method:

Depending on the bank or credit union, you may have the option to apply online, in person, by phone, or via mail. Online applications are generally the fastest and most convenient option.

Gather the required documents:

You will need to provide proof of your identity, such as a government-issued ID (driver's license, passport, etc.), and in some cases, additional documentation like a Social Security card or Alien Identification card. If you are opening a joint account, you will need to provide the same documentation for the other account holder.

Complete the application form:

Fill out the application form with your personal information, including name, address, date of birth, and contact details. You may also need to provide information about your financial situation, such as net worth, annual income, salary, or monthly expenses. This information helps the bank assess your financial stability and eligibility for the account.

Provide funding source information:

Some savings accounts require an initial deposit to open the account. You will need to provide the funding source for this deposit, such as a credit card, debit card, or an existing bank account. If you are applying for a joint account, you may also need to add funding from the other account holder.

Review and submit the application:

Before submitting your application, carefully review the disclosure document provided by the bank or credit union. This document outlines the terms and conditions of the account, including any fees, interest rates, and other important information. Once you are satisfied with the terms, submit your application for review by the financial institution.

After submitting your application, the bank or credit union will review your information. If your application is approved, you can proceed to set up direct deposits or automatic transfers to start building your savings.

Frequently asked questions