Should I open a savings account?

You’ve worked hard to save up some money. Even if it’s just what was hiding between the couch cushions, every little bit counts. But now what? It isn’t always easy to figure out what to do or where to put your money.

For some people, a savings account can be a great place to keep your money safe while also helping it grow over time with interest. But before you open one for yourself, consider these 5 questions you may not have thought about.

For the most part, yes. Even if you have a very small amount of money (just a buck or 2 will do), you can use a savings account to keep it safe while earning interest. If you want to learn more about how this works, or why having a savings account may be a good choice for your money, check out the basics of a savings account.

To get started, you’ll just need a few key pieces of information to open a savings account, like your driver’s license, Social Security number, date of birth and contact information.¹ But some people may have additional requirements to open an account.

If you’re under 18: You’ll probably need a parent or legal guardian to be a co-owner on the account.²

If you’re not a U.S. citizen: You can open a savings account, but you may need to take a few extra steps to verify your identity.¹

The number one way to know if your money is safe is to make sure your bank is a member of the Federal Deposit Insurance Corporation (FDIC). Savings accounts are typically insured by this organization.³  

The second way to know if your money is safe is to be smart about fraud and cyber security. Ask your bank about its fraud policy. You don’t want to be on the hook for purchases you didn’t make if someone gets your information. Many banks also have security measures like email or text alerts that can let you know about unusual activity right away.

Yes. You can withdraw from your savings (after all, it is your money), but keep in mind that some banks may have monthly withdrawal limits despite the fact that a little more than four years ago, the Federal Reserve removed withdrawal limitations.⁴

But there’s no limit to the number of times you can make a deposit. Even if you set up an automatic savings plan so you save money each month, you can still deposit any extra cash whenever you like.

Plus, savings accounts can easily be closed at any time, and you can ride off into the sunset with your money.⁵

Most savings accounts are free, but double-check the terms and conditions of the account you choose to make sure there aren’t any fees or costs you missed.

For example, some accounts could have maintenance costs or minimum balance fees. Some may also charge you if you go over the monthly number of withdrawals it allows.⁴ You work hard to save your money, so be sure you know if you’re getting charged. If you aren’t OK with the fees, look for a savings option that better fits your needs.

The nice thing about a savings account is that you can earn extra money through interest just for leaving your money in a secure place. But keep in mind that with earning money comes paying taxes. Even if you only earn a little bit, you’ll still need to pay taxes on the money you make through interest (not your original deposit).¹ The IRS sees this interest money the same way they see the money you get from a job—money you’ve earned and therefore owe taxes on.

There are a few different kinds of savings accounts that specialize in retirement, and some of these are tax-free. But for a classic savings account, be prepared to pay taxes on the interest you earn. 

While these 5 questions may not be the first you ask, they can help give you a better picture of a savings account and if it’s right for you. Having all the information up front will help you make an informed and empowered decision about what to do with the money you save.