With the New Year upon us, many are reflecting, taking stock of their finances, and looking to create a budget they can stick to. Few tasks are more important to a sound financial plan than setting aside money for a rainy day, and what better way to do that than by opening a savings account? While opening one is always a wise decision, is there a best time of year to open a savings account?
What Is a Savings Account?
A savings account is an FDIC-insured financial product designed to cultivate and maintain savings. They offer interest rates that are higher than most checking accounts, but still lower than other types of investments such as stocks and bonds. Interest accrued is not taxed until you withdraw, allowing your funds to grow.
The Benefits of Opening a Savings Account
Having and using a savings account has a number of advantages that make them an important tool in any financial plan. Some of the benefits include:
• Security: All savings accounts are FDIC-insured, so you know your money is safe.
• Interest Earnings: Your savings will grow faster thanks to the various interest rates.
• Easily Accessible: You can make withdrawals as needed, as long as you meet the minimum account/time requirements.
• Discipline: Having a separate account with funds dedicated to savings serves as a reminder that you’re setting aside money for the future.
The Best Time to Open a Savings Account
When it comes to opening a savings account, there are a few things to consider, such as the type of account, the interest rate, and the bank or other institution where the account is opened. But one of the most important factors is the time of year you decide to open the account.
Generally, the best time to open a savings account is at the start of the year. Banks typically offer better interest rates during the first few months of the year, as well as other promotional offers that can help you maximize savings. During this period, banks are eager to attract new customers by offering higher than usual rates.
In addition, the cash influx during the holiday season tends to dip after the start of the year, so the banks are looking to make up that loss. This means they are more likely to provide better rates as an incentive for customers to open an account in January.
When to Avoid Opening a Savings Account
One time of year to avoid opening a savings account is toward the end of December. With the holidays in full swing, there isn’t much of an opportunity to get any promotional offers. Banks need to focus their efforts on existing customers and the influx of new holiday customers.
Also, the minimum balance requirements imposed by banks during this time are higher than usual. The banks are cash-strapped, so they’re looking for larger deposits. This makes it more difficult for customers to open an account and take advantage of the bank’s promotional offers.
Tips for Finding a Good Savings Account
Once you know when to open a savings account, there are a few other things to consider before taking the plunge:
• Compare Rates: Shop around to find the best possible interest rate.
• Understand Fees: Be aware of any hidden fees or charges the bank might levy.
• Location: Consider the convenience of a local bank when applicable.
• Customer Service: Check online reviews to ensure top-notch customer service.
• Online or Offline: Decide which format you’d prefer—online or brick and mortar.
Opening a savings account is an important step in achieving long-term financial security, and timing matters when it comes to getting the best terms. Generally, the January is the best time of year to open a savings account due to the promotional offers banks offer, as well as the higher interest rates available. However, it is important to keep in mind the other factors to consider—such as fees, customer service, and location—when deciding which bank is best for you.