Saving for the future helps you meet your financial goals and prepare for retirement. While it may seem difficult to save money for a rainy day, opening a savings account eases stress and secures your nest egg for whatever comes next.
It depends on what state you live in, but you’ll typically need to make up for about 80% of your pre-retirement income per year to live the same pre-retirement lifestyle, according to The Wall Street Journal.
Let’s say your annual income was $80,000. Using this model, you’ll want to have about $64,000 a year in retirement to cover your expenses. This is because you’ll still need to pay for normal living costs without having to pay for Medicare and Social Security taxes or contribute to a 401(k) or IRA. These numbers may seem overwhelming but don’t worry. Starting to save now can make this process less stressful.
Before retiring, there are numerous financial goals you can save for, including making a down payment on a house, taking a dream vacation, getting your child ready for college, getting married to your special person and so much more. Don’t let these big life moments pass you by.
Let’s dive into how to open a savings account and the benefits you can receive by doing so.
How To Open a Savings Account
Before you can enjoy the countless benefits of having a savings account, you actually have to open one. Ready to get started? Here are the steps to follow:
Step 1: Choose How to Apply
Depending on your bank, you have the freedom to apply whichever way is easiest for you — either in person or online. All of these options are smooth and proactive; it just depends on how much interaction you’d like with your banker. If you want extra assistance or someone to walk you through the necessary steps, going in person is probably most suited for you. If you desire a process with minimal contact, online is your best bet.
Step 2: Gather the Right Documentation and Identification
You’ll need your Social Security number, a government-issued I.D. and contact information to open a savings account. Either bring these documents with you in person or have them handy while you set up your plan online. Your bank uses secure systems that keep your personal information safe, so you can trust that your data won’t be compromised.
Step 3: Select the Type of Account
Let your bank know if you’re opening a single account for yourself or a joint account with another person. If opening an account with someone else, you’ll need to have their documentation and identification as well.
Step 4: Submit Your Application
If you go in person, this is done instantly. If you apply online, it may take a few days for the bank or credit union to verify your information and open your account.
Step 5: Start Saving
If your savings account has a minimum requirement, you’ll need to put that amount in. Otherwise, you can start depositing your savings as needed. Many banks do require an initial deposit, often between $100 and $200. Even if your savings account type doesn’t, it can be helpful to put money in right away so you can start earning interest as soon as possible.
Additional Money Management Tips and Best Practices
Once you open a savings account, it’s up to you to determine what your savings journey will look like. While it’s hard to put cash into this account rather than spend it on a fun trip or a delicious meal, you can follow these tips to improve your spending habits:
Set Smart Savings Goals
Create SMART savings goals — specific, measurable, attainable, relevant and time-bound. Vague and unrealistic goals can be frustrating and disappointing, leaving you to give up or be unsure if you’re moving in the right direction.
Specific and measurable initiatives make it easier for you to track your progress. Attainable goals allow you to celebrate small successes without getting discouraged and throwing in the towel. Relevant and timely objectives help you link your financial and personal goals to achieve while following a designated timeline. Ultimately, setting these types of targets can help you take small baby steps toward long-term savings goals.
Craft a Savings Strategy
Budget and track expenses by following a set plan. This could include setting up direct deposit for your paycheck, setting a realistic financial goal, using a budgeting app and avoiding unplanned splurges. You can also take advantage of available automatic savings tools with digital banking or mobile banking accounts. These tools can help you analyze your checking account activity and create a personalized savings goal based on your spending habits.
To build a personal savings plan:
1. Take financial inventory: Understand your current financial situation and what types of assets you have. This could include cash, a 401(k) plan, a money market account or a certificate of deposit (CD).
2. Establish your SMART goals: Here’s where your goals can shine. They will serve as the foundation for your plan and give your savings direction.
3. Determine how much to allocate to each financial goal: With a monthly budget, you must know how much is needed for each target. That said, decide how much you want to save for your SMART goals. That way, you can properly allocate your monthly income.
4. Talk to your financial advisor: Your financial advisor understands your situation and can help guide your savings.
Try Out Money Market Accounts
This type of account is also beneficial for people looking to save money. A money market account functions like a traditional savings account but offers checking account features. With a high-interest rate and advantageous features, this type of bank account can give you freedom and flexibility while helping you put aside funds.
Benefits of Saving Accounts
Savings accounts are a low-risk way to build your retirement fund and earn a nice long-term return on your money. Additionally, you can enjoy the following benefits from opening a personal savings account:
Interest Earnings
Many savings accounts have an interest rate that allows you to earn a substantial annual percentage yield from your existing savings. This enables your money to work for you while it’s stored. They also don’t lose money, unlike some other riskier investment options. So, no matter what the market does or how bad a financial crisis gets, your savings bank account will never go down — unless you take money out, of course.
While the interest rate may not be as high as less safe investments, you may be surprised by how much growth you’ll see by keeping your funds accruing over time.
Security
You can have peace of mind when using a savings account. Not only are these accounts automatically insured by the Federal Deposit Insurance Corp. (FDIC), but they’re also backed up with the latest safety measures and technology. This includes two-factor authentication, strong passwords, encryption and other protective innovations. When you put your money into a savings account, you can trust your financial institution to keep it secure from unauthorized access.
Easy Access
Unlike a CD account that has a specific period where your money is restricted, savings accounts enable you to freely access your money when and where you need it. Just use your credit card or debit card at an ATM to get cash at a moment’s notice.
This makes it a wonderful option for building your emergency fund. When an emergency comes, you can easily access your money immediately. CNBC states it’s important to have about three to six months of income stored just in case something unexpected happens. Let’s say your car breaks down or your child breaks their leg. Having the option to deal with these urgent issues without the stress of access fees or time-consuming processes enables you to focus on the problem at hand.
Start Saving With Bank Midwest
With a minimum balance of only $100 and no monthly fee, Bank Midwest is an easy and simple way for you to start preparing for your future. Our savings account provides you:
- Automatic interest rate bumps as your savings grow.
- Easy access to your money.
- Safety and security with FDIC protection up to $250,000.
Open an account with Bank Midwest today to start saving, and connect with one of our team members to learn what money management services our financial institution can provide you.