The Best Time To Open a Savings Account

Timing is everything, especially with money

Parent with child, looking at a phone
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Savings accounts are low-risk places to keep cash you're putting away for a rainy day or a financial milestone. Since savings accounts are interest-bearing, your balance grows at a faster rate compared to a checking account or cash stashed underneath a mattress.

Opening a basic savings account is a simple process—you can open a new account in just a few minutes—but knowing when to open one isn't always obvious. If you are wondering if there’s a “best” time to open a savings account, here are a few things to consider.

Key Takeaways

  • Having at least one savings account is essential for adults to meet financial goals or separate money that's otherwise off-limits.
  • Rising interest rates are a good opportunity to open a savings account with a higher interest rate.
  • Parents may open a savings account for minor children anytime the child starts accumulating money.
  • Opening a savings account to take advantage of a promo offer is a solid move when you can meet the requirements.

When To Open a Savings Account

Because of the safety and security they provide, a savings account is an important consideration to help you meet your financial goals. There are also a number of other specific reasons to open one.

If You Don't Have One

If you don't have a savings account at all (and you're over age 18), the best time to open one is now. Having a savings account makes a portion of your money less available to you, which makes it easier to accumulate and reach your short- and long-term financial goals.

When There Are Rising Interest Rates

When interest rates are going up, opening a high-yield savings account allows you to snag better returns on your deposits. If you already have such an account, it won't hurt to shop around for even higher yields. When interest rates go up, it's common for banks to continually offer increased interest rates to entice customers.

When There Is Market Volatility

A high-yield savings account is an attractive alternative for earning interest when stock market volatility puts investing outside your risk tolerance. You can continue earning a decent return on your savings and put the money into equity investments once you feel comfortable about the market.

For a Minor Child

Parents should consider opening a savings account for their child once they have saved up some money on their own. Receiving a large cash gift is another opportunity to open a child's first savings account. Teaching children to establish good money habits early on can set them up for financial success later in life.

Promotional Offers for New Savings Accounts

Promotional offers from banks that reward new customers for opening an account and making a deposit carry additional incentives for opening an account. For instance, a promotion may offer a $200 bonus if you deposit $20,000 within 20 days of opening your account.

Read the fine print to learn about any exclusions, things that could keep you from earning the bonus, or fees associated with the account. Some offers are only available with a specific promo code or when you apply from a third-party affiliate link. In addition, current bank customers may not be eligible for cash promotions. Even if you meet the initial requirements, you can lose eligibility if you close the account too soon or don't maintain the minimum required balance.

To protect your personal information, only follow promotional links from reputable websites.

When To Open Multiple Savings Accounts

Having more than one savings account allows you to take advantage of the benefits offered by each. As your cash grows, maintaining savings accounts at different banks ensures all your deposits have adequate deposit insurance coverage. There are a few types of savings accounts to consider.

Traditional Savings Account

A traditional savings account offered by a brick-and-mortar bank gives you access to a network of ATMs and physical bank branches where you can access your money without paying additional fees.

Open a traditional savings account when you need the benefit of in-person customer service, need to make frequent cash deposits, or if you’re not comfortable banking online.

Online Savings Account

An online savings account is offered by a bank that operates strictly online, which means visiting a bank branch isn't an option. Because their operating costs are lower, online banks tend to offer higher APYs on savings accounts, allowing you to earn more interest on your deposits.

Open an online savings account when you want to earn more interest on your balance and have the flexibility to do most of your banking electronically.

Money Market Account

A money market account combines the high-yield benefits of an online savings account with the accessibility of a checking account. Certain transactions don't count against most banks’ six-transaction limit, which gives you more penalty-free access to your funds.

Open a money market account when you have a significant amount of money in a checking account and interest rates are high or increasing.

Deposits in a money market account are insured at FDIC- and NCUA-insured banks and credit unions. Money market mutual funds, however, do not have deposit insurance.

If you have more than $250,000 deposited at a single bank, even in multiple accounts, make sure all your balances qualify for federally-guaranteed deposit coverage.

Frequently Asked Questions (FAQs)

How do you open a savings account?

You can open a savings account online or in person by choosing a bank, completing an application, providing proof of your identity, and making the minimum deposit, if one is required.

How old do you have to be to open a savings account?

In most states, you need to be 18 or older to open a bank account on your own. Otherwise, the account must be designated as a minor or youth savings account (even for a baby), and have a parent or legal guardian named as a joint account owner or custodian.

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Article Sources

  1. Consumer Financial Protection Bureau. “The Fed Is Raising Interest Rates. What Does That Mean for Borrowers and Savers?

  2. Securities and Exchange Commission. “Saving and Investing: ​​A Roadmap to Your Financial Security Through Saving and Investing,” Pages 14-15.

  3. FDIC. “Your Insured Deposits,” Page 6.

  4. Capital One. “Choosing Between Online Banking vs. Traditional Banking.”

  5. Consumer Financial Protection Bureau. “What Is a Money Market Account?

  6. Consumer Financial Protection Bureau. “Is a Money Market Account Insured?

  7. US Bank. “5 Tips for Parents Opening a Bank Account for Kids.”