Diving into Savings Accounts

Rather than “taking the plunge,” opening a savings account is more like dipping your toe into the water. But, we’ve all got to start somewhere, and this is where many people start out. Opening a savings account can be the first step to a lifetime of good savings habits.

You’ve probably heard the advice, “Pay yourself first.” That doesn’t mean give yourself some cash so that you can go shopping. When you sit down to pay bills, write the first check to a savings or investment account. It doesn’t matter if you start with a very small amount, just make savings a habit. And when you get bonuses and raises, you can increase those checks you write to yourself.

When you shop for a bank, savings and loan, or credit union where you can open a savings account, make sure to ask the following questions:

• Is there a required minimum balance for a savings account? Some institutions charge a fee if your balance falls below a required minimum.
• What are your fees for savings accounts? You can expect to be charged either a monthly or quarterly maintenance fee. The institution may also charge you a fee if you close the account before a specified period of time.
• How much interest will I get on my savings? Expect around 2% interest. Is the account federally insured? Ask specifically whether the institution has Federal Deposit Insurance Corporation (FDIC) insurance. If it does, then you can get up to $100,000 of your savings back if the bank fails.
• What services do you offer? Many banks now offer banking by telephone or the Internet.
• Does the bank use a tiered account system? A tiered account system allows you to earn higher interest if your account balance is consistently over an amount specified by the bank.

Call around to at least three different institutions (banks, savings and loans, and/or credit unions) to compare their offerings. (You can also call brokerage firms, which offer CDs, to find out what their minimums and fees are.) If the answers to all of these questions come out about equal, choose the institution that’s most convenient for you and offers the best service, convenient hours, friendly tellers —whatever suits your banking habits best.