A savings account will allow you to set aside funds and accumulate interest on them. Most banks and some other types of financial institutions offer these accounts. Although they are widely available, you need to compare saving accounts before opening one to ensure that you make the best decision. Some things to consider are Federal Deposit Insurance Corporation (FDIC) coverage, interest rates, and withdrawal fees.
FDIC coverage provides insurance for your money if something happens to the bank. For example, if a chain of banks is robbed and a large number of clients rush to withdraw their money, the bank may not have enough to pay everyone. If the bank has FDIC coverage, however, each account holder is entitled to up to $100,000 US Dollars (USD) from this government insurance plan. Most financial institutions are covered, but it is always best to make sure, especially when dealing with online financial institutions.
Earning interest is one of the primary reasons why people open savings accounts. Interest is money the financial institution will add to your account for allowing it to hold and use your money. The amount that an account holder earns is usually expressed as a percentage, which is one of the factors you should use to compare savings accounts. Always try to find the account that will provide you with the highest amount of interest.
Also, consider how often interest is earned when you compare savings accounts. The more often that interest is paid, the more you will earn. For example, if interest is paid monthly, you will receive extra money in the form of interest in your account in June and then you will earn interest on that in July, and so on. If the interest is only paid quarterly, however, you will not earn as much because you will only receive extra funds every four months.
When you compare savings accounts, you need to consider how often you will withdraw money. Some banks discourage regular withdrawals from savings accounts by limiting the number of free transactions and by charging notable fees for removing funds. If you know you will take money out of your account often, find an institution where this habit will not be a financial burden.
One more thing to consider when you compare savings accounts is what you plan to do in the future. If, for example, you are planning to take out a home mortgage, you may want to check out the savings accounts at the financial institution where you plan to apply for the loan. It can often make it much easier to obtain loans if you have accounts in good standing with a particular financial institution.