Savings Accounts



A savings account is an account established at a bank, which not only stores your money and puts it aside, but also gains a bit of interest on that money. Interest is the profit that is earned when you lend money. The bank you have a savings account with technically borrows this money, and pays you back interest in return.


While stocks is another great option to invest your money in, the upside of a savings account is that they are federally insured up to $250,000. In other words, if the bank you have an account with ends up failing, you will not lose any money because of this federal insurance, so it is a safe way to store money. However, it usually has lower returns than stocks.


Savings accounts can be a good starting point for money management, especially at a younger age where you would want your money’s risk to be minimized. Savings accounts can also be useful to prevent overspending, as you can keep money in the account for an emergency or future payment. This can be a better alternative than to have it easily accessible in your wallet, which can tempt reckless spending.


Setting Up an Account


To get started with a savings account as a teen, keep in mind that you can only open a savings account together with a parent, grandparent, or guardian while you are a minor. Unfortunately, you will not be able to get one by yourself while you are under 18. However, it is not a difficult process; the guardian simply has to include the teen’s name when opening an account. While both the guardian and teen have their names on the account for as long as it is open, the guardian’s name can be removed once the teen becomes an adult. There are a couple of options for teen savings accounts.


Custodial UTMA Account


A custodial Union Transfer to Minor Act (UTMA) account ensures that the money in the account solely belongs to the teen. The main feature of this account is that teens cannot access the money until they are a legal adult. Once they are of age, they can access and utilize the money in whatever manner they want. While this account can seem unappealing since it cannot be accessed while you are a minor, it discourages any reckless spending and it can be a useful fund for emergencies once you are an adult.

Furthermore, it ensures since the guardian cannot access the money in any way, even when the teen is a minor and still after the teen turns 18. The money will only be accessible by the teen once they are a legal adult as their protected property.


Basic Savings Account


There are regular savings accounts used mainly by adults, and also accounts designed specifically for minors. The minor-specific accounts are mainly to help kids and teens take up good savings practices. Both the guardian and the adult can deposit money within the account, and also withdraw money at any time. While this is a basic and usually beneficial option, there are times when a guardian can take advantage of the teen’s savings and potentially drain the account. (If you are worried about this, consider opening a custodial UTMA account described above.)


These basic savings accounts come with an ATM card. You can use this card with any ATM (usually found at a local bank) and you can withdraw money from the account. You can also withdraw money from the bank that you have an account with.


Be sure to check if the bank has an online/mobile banking option, which can track deposits and withdrawals.


Which Bank + Account to Choose?


A very common option is to establish a savings account at a “brick-and-mortar” bank that is close to your house. In other words, a physical bank location where you can conduct business with workers in-person; the common type of bank that you are likely familiar with. An account in this type of bank allows easy access to funds.


Another option is to set up an online savings account. The benefit of this option is that there are usually higher interest rates compared to brick-and-mortar banks. An online bank will pay you more interest due to the lack of physical contact and maintenance that is required with a brick-and-mortar bank. However, the money in the account will not be as accessible. To access funds in the account, the money would need to be transferred to an offline bank account (such as a checking account), which may take 2-3 days.


When finally choosing which bank to set up an account with, you want to look at the pricing of fees to open and maintain an account, as well as the interest rates the bank offers to grow your money. It is desirable to find an account with no or a low opening deposit requirement (minimum amount of money put into the account). It is also beneficial to find an account with a higher interest rate, and low maintenance fees.


First, it is recommended to look at accounts at your guardian’s current bank. Do not immediately settle, as there may be accounts from other banks that have better features. Keep in mind that accounts with higher interest rates may not be the best choice, as they can have more expensive fees and other drawbacks to balance it. Overall, the ideal account is really dependent on your situation, and what is best for your financial habits. A great starting place to look for accounts is the NerdWallet or SmartAsset sites. You can also use this useful savings calculator to find an account.


In conclusion, a savings account is a very useful tool that should be heavily considered! It is important to develop good economic and financial habits early, and a savings account is definitely a step in the right direction. It can also keep your money safe, and perhaps grow it a bit with interest! Start looking for an account, and get on your way to becoming a teen trillionaire!


Written by Brian Caballo


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