A savings account, also known as a savings deposit account, is the simplest way to set aside money for your future needs – from a vacation to buying a home. Think of it like a piggy bank that pays you. Plus, savings accounts are one of the most secure ways to keep and grow your money.
How do savings accounts work?
Putting your money in a savings account usually lets your money work harder than if you left the same money in your everyday checking account. When you put your money in a savings account, the bank will pay you a higher interest rate than you'll make with most checking accounts, growing your money every year. This applies to both traditional and online savings accounts.
The key benefits of savings accounts
The best thing about a savings account is it lets you earn interest on money that you don't need for your daily or monthly expenses. It's also a handy way to put aside money that you'd like to keep for a long-term financial goal.
Money in a savings account is easy to access when you do need it. There's usually no waiting time for withdrawals and, unlike most Certificates of Deposit, there are no penalties for early withdrawal.
A major benefit of savings accounts with online and mobile banking, such as Citi savings accounts, is that most banks allow you to set up automatic deposits. This is a great way to steadily build up savings each month without having to think about it.
Other savings account considerations
Some banks may have differing rules for transactions made at ATMs or teller windows in banks, so it's best to check with your financial institution about their specific rules.
If you're putting away more than a few hundred dollars a month, it may be worth seeking a higher return with a Certificate of Deposit, or a high-yield savings account. You can view Citi's savings products if you'd like to explore your options further.
How much should I keep in a savings account?
Savings accounts can also be considered as rainy-day funds. As a rule of thumb, you should aim to keep three to six months of living expenses in a savings or other account where the money is easily accessible. To get started, aim for just $500 to $1,000. That's usually enough to start saving for something important, and it's also a nice reserve to have should you suddenly need cash.
How to open a savings account
You can easily open a savings account with Citi online, in branch, via our mobile app or over the phone.
Go to a bank branch or visit your bank online. Be sure to have at least one government–issued photo ID, like a driver's license or passport, and your Social Security number. Some banks may ask for proof of your home address, such as two recent utility bills, phone bills or rent receipts.
Most banks require that at least one account holder should be 18 years of age or older. Some banks have savings accounts a parent or guardian can share with a minor. Talk to your bank's branch manager about other savings products for minors.
Savings account fees
Some savings accounts require a minimum deposit to open an account. Citi savings accounts require no minimum deposit to open an account. Many banks will waive the fees or minimum deposits on savings accounts if you also have a checking account with the same bank – with Citi, it's easy to link your Checking and Savings accounts to help meet minimum balance requirements.
How do I add money to a savings account?
You can deposit cash or checks into your account at a bank branch or an ATM. Checks can also be deposited by mail or by taking a picture of the check with the Citi Mobile Banking app. You can also move money from other accounts, such as your checking account, into your savings accounts. Most banks don't charge for this service.
Many employers who use direct deposit will let you split your paycheck between your checking account and your savings account, so the money you want to save never even enters your checking account.
Can I have more than one savings account?
Yes. Some people find it easier to save if they keep a separate account for each major savings goal – say a new home, a child, a vacation or an emergency fund. The advantage to having multiple savings accounts is that it's easier to track your progress toward your financial goals.
Are savings accounts insured?
All Citi saving accounts are insured by the FDIC up to $250,000. Visit www.fdic.gov for more information
Other types of savings accounts
Besides the standard savings deposit account, most banks offer nearly a dozen other kinds of accounts in which you can save money:
- High-yield savings accounts offer better interest rates than savings deposit accounts, but may require a larger minimum deposit and available only to customers in certain locations.
- Certificates of deposit (CDs) are time deposit accounts that require you to commit your savings for a specified time period, usually three months to five years, and typically offer higher interest rates. In return for locking your funds, you get a fixed interest rate of return. That is, once the account is opened, the interest rate does not change. However, if you withdraw your money before the end of the specified term, you will likely have to pay a penalty. Citi offers a range of CD products, including No Penalty CDs.
- Traditional Individual retirement accounts (IRAs) let you put money away for retirement, with contributions generally tax deductible in the year made (subject to certain income qualifications). Federal income tax on earnings is deferred until they're withdrawn, with amounts distributed – including previously untaxed contributions and earnings – subject to tax at ordinary income rates at the time distributed.
- Roth IRAs let you fund a retirement account with after-tax income, if you satisfy the relevant income limitations. Earnings will accumulate tax-free, and qualified distributions are not subject to any federal income tax.