Owning a pet, although a wonderful experience, can be expensive, especially when you factor in annual vet fees and monthly expenses such as preventative flea and tick care as well as food and grooming costs. One way many pet owners are affording pet care is by opening a savings account and getting pet insurance.
The combination of both pet insurance and a pet savings account is the best way to protect yourself for financial emergencies related to pet ownership. While we've already discussed pet insurance in detail before, many dog owners are still confused about the benefits of opening a pet-specific savings account, and which ones are best.
Before you commit your pet related funds to an institution, it’s important to understand a few key factors of different types of savings accounts. I've had a savings account for my dogs for years, and below I'm going to discuss some common terms you may see and hear while shopping for the right account for yourself and your furry family member.
ALSO READ: Financial Independence and Dog Ownership
The Basics of Pet Savings Accounts
Here are some of the basics of a savings account in the U.S. that anybody (not just pet owners) should be aware of before transferring their money there.
Make sure your pet's funds are insured.
The FDIC, Federal Deposit Insurance Corporation, is a federal institution whose sole operation is to give individuals stability and assurance when utilizing banking agencies. Through their coverage, the FDIC is able to insure a maximum $250,000 per banking individual. Essentially, acting as a third-party insurance company, mediating between banks and those who entrust the banks with their funds.
When researching pet savings accounts with different banks, credit unions, and other financial companies (such as credit card businesses), you should always look for or ask about their FDIC credentials. If your savings become compromised, the FDIC will step in to ensure your funds are returned to you, honoring up to $250,000 or less.
Choose those that let you withdraw more often.
Be mindful of the number of times you're allowed to withdraw from your savings account for your dog's or cat's expenses. There's a limit. This is because while savings accounts are convenient for us, they’re also beneficial to the nation’s banking system as it creates a monetary backing to the institutions.
In order to protect this symbiotic relationship, a federal regulation known as Regulation D states that banks and other financial institutions are able to penalize (either with fees or simply closing the account altogether) savings account holders if they withdraw more than 6 times per calendar month from said account.
Ensure your pet's money will grow.
APR stands for Annual Percentage Rate. In reference to savings accounts, APR represents the percentage of your earnings that will be gained annually. However, it generally doesn’t account for any other factors that will ultimately affect that rate, such as fees or any compounded interest (as well as how often that interest is compounded).
APY, Annual Percentage Yield – or sometimes referred to as Earned Annual Interest Rate (EAR) – differs from APR. APY looks more specifically at the entirety of the savings account and what affected it for the year, giving you a more detailed view of what the account incurred for the full year. If you open a savings account that only earns interest annually, the APY and APR might calculate at the same percentage.
Pay attention to the trajectory of your pet's money growth.
If a savings account you’re looking into boasts compounding interest, a simple translation is that they’re advertising growing interest every “period” whatever their period may be (daily, monthly, quarterly). All savings accounts feature compounded interest but will differ on how often that interest is combined with the account balance.
See if they have tools for tracking your pet's money growth.
From the variety of savings accounts out there to choose from, you will encounter different finance tools, including the periodic rate. The interest your account incurs will be defined by how often it is adjusted. The ideal account will incur interest every day, meaning your pet's savings grow every single day based on the amount in the account and APR (this is sometimes referred to as DPR (Daily Periodic Rate)).
In other words, the interest is added to the account balance each day and then gains even more interest as the balance grows 365 (360 for some institutions) days out of the year. Most accounts’ periodic rates, however, are not calculated daily, but typically monthly or sometimes quarterly.
Fees or Penalties
Choose accounts without any fees and minimal penalties.
While many financial agencies advertise no monthly fees on savings accounts, they can exist, so always be sure to ask about them before opening your pet's savings account. After all, the point of putting money away for your dog is to save and grow your initial deposit for an emergency in the future; not watch it slowly diminish.
Penalties can occur if certain guidelines aren’t followed. This could mean not maintaining a minimum balance or withdrawing too many times within a certain period (refer to Regulation D). Sometimes, penalties may be in the form of a decreased interest rate or increased periodic rate, resulting in less APY for the account.
Pick smallest, or even non-existent, minimums.
Some accounts may be associated with minimum balance requirement, meaning the account may exceed $5,000 – for example – but never go below that amount. Accounts with minimum balance requirements are likely to come with fees or penalties if the balance requirement is not adhered to.
Another form of minimum you may come across is a minimum deposit requirement, which asks its saver to make an initial lump sum deposit that meets its requisite: of a certain amount or higher.
The Perks of Savings Accounts for Pet Owners
Unlike basic checking accounts, a pet savings account will give you the opportunity to continuously increase your initial deposit. The longer your pet goes without any health emergencies that will require you to draw the money, the faster those funds will grow.
All savings accounts are built to reward savers rather than spenders, thus you're encouraged to not dip into the account. Banks do this by enforcing maximum withdrawal limits as well as fees for breaking these standard “rules”. Of course, should a pet emergency present itself, savings accounts are there if or when you need them.
One example many dog owners are familiar with is a crisis event, such as a sudden visit to animal urgent care for a serious injury or a surgery. The visit, though necessary for the pet’s health and care, typically results in a costly bill that’s usually required to be paid in full. If you don't have insurance (or if the insurance only reimburses you months later), having enough funds in your pet savings account available could be a life safer.
Such emergencies often send dog owners into debt, or even to give up a dog, or worse – put the dog down. It's because not all pet owners, especially those who haven't prepared well, may have the means to pay for emergency care or would rather not utilize a credit card or significantly drain their checking account in order to do so, making a savings account beneficial during times of financial or medical crisis.
Now, there are several kinds of savings accounts available for you to park your funds, but the below five are most ideal for pet owners.
1. Money Market Accounts
Pet owners may appreciate Money Market Accounts (MMA), because they give the saver more leniency when it comes to using the money within the account. If a dog has a sudden medical issue, their owner may not have the financial means to care for them right away. Even with a typical savings account, they may be penalized for withdrawing from the account.
But with a Money Market Account, the owner of a sick dog can feel confident in dipping into this savings account without worrying about fees. While MMAs aren’t exempt from federally regulated savings account rules, such as Regulation D, they do allow their depositors the ability to write checks from the account (a rare quality for the usual savings account). Some MMAs may even come with a debit card.
This would be an ideal account to have in addition to the normal checking account you have with your local bank as it has all of the benefits of a savings account without the heavy restrictions of some.
As a downside, a Money Market Account, given its tolerance, may have higher minimum balance requirements as well as a higher initial, one-time fee or initial deposit minimum so it’s potentially only ideal for someone with a large lump sum ready to commit to a animal savings account now.
Best Money Market Accounts for pet owners:
Synchrony High Yield Savings
(2.20% APY, no minimum balance)
Capital One 360 Money Market Account
(2.00% APY, $10,000 minimum balance)
Marcus by Goldman Sachs Online Savings Account
(2.05% APY, no minimum balance)
Discover Bank Money Market Account
(1.85% APY, $2,500 minimum deposit)
CIT Bank Money Market Account
(1.85% APY, $100 minimum deposit)
2. Short-term CDs
The main idea of a pet savings account is to protect earnings and have them available for your pet's future, as well as increase the amount with interest, and hopefully leave it untouched as it continues to incur profit for years to come (or at least fighting inflation).
Those drawn to this idea of investing in your own wealth will be keen to learn more about CDs, or Certificates of Deposit. CDs operate by terms, a length of time set at the initial opening of the account. Most terms are anywhere between a 6 to 60-month period and create a timeline in which the saver is not able to touch the funds without incurring penalty). CDs with longer terms, such as an 18 to 60-month, generally have higher interest rates, meaning more profit to the account and its owner.
However, when it comes to owning a pet, a short-term CD may be the better option as you won’t be stuck with an account full of money you can’t utilize in the event of an expensive vet visit or need for a new backyard fence to keep Fido inside and safe. You could be hit with expensive penalties should you decide to withdraw from the account before its term ends, which is why – depending on your financial situation – a short-term CD, although with its lower interest, may be the best plan.
There is no penalty to opening a short-term CD and the funds within the account once the term is completed, or “matured” as finance professionals will refer to it as, can be rolled over into a new CD under a lengthier term or even transferred into a different account.
Best Short-term CDs for pet owners:
Capital One 360
(2.70% – 3.10% APY, no minimum deposit)
(2.65% – 3.10% APY, no minimum deposit)
Marcus by Goldman Sachs
(2.65% – 3.10% APY, $500 minimum deposit)
(2.70% – 3.15% APY, $5,000 minimum deposit)
Connexus Credit Union
(2.80% – 3.50% APY, $5,000 minimum deposit)
3. Online Savings Account
In today’s tech-savvy world, online savings accounts often offer some of the modern perks we’ve grown to expect and value. For one thing, applying can be done from the comfort of your home or office while a napping kitten or puppy sleeps at your feet. The biggest benefit of online pet savings account is that they normally offer best interest rates on both standard accounts and Certificate of Deposits (CDs).
Another benefit is that online pet savings accounts often come with a multiple-platform functional mobile app, letting you check your balance at any time with a few simple clicks. Their online banking system is also generally the best. Many online savings accounts offer some of the best interest rates as well, and some even have no minimum balance requirement.
On the other hand, these accounts aren’t recommended for those who prefer to handle their banking in person or in a physical building. It’s likely with most online savings accounts, you’ll be handling the account yourself through the web, mobile app, or by calling a customer service number. Most online banks do not have physical locations, or only have very few around the country.
Physical bank locations (big names), to keep up with their competition, have long begun to offer online savings accounts as well, so if you are already a happy and loyal member of your neighborhood branch, ask them about online savings accounts if it’s something that peaks your interest. It could mean the difference between you being able to afford care for your pet in the future, although an online-only bank is likely to offer you better rates.
Best Online Savings Accounts for pet owners:
Ally Online Savings
(2.00% APY, $150 – $200 signup bonus)
Synchrony High Yield Savings
CIT Bank Savings Builder
Barclays Online Savings
4. Joint Savings Account
Joint accounts can double or triple (depending on the number of account-holders) your FDIC-insured $250,000 in the event of bank failure. While it's unlikely you'll have that much money in a pet's fund, it may be good option to have but not that significant. In general, these are only more advantageous for multiple dog business partners (rather than just dog owners) as the account may offer free intra-account transfers. Out of all four options, these are least beneficial for dog owners.
On the other hand, those who run a dog kennel or pet grooming business may consider this type of savings account as more advantageous, even though families or couples are just as eligible for this standard savings option. With multiple owners, the minimum balance may be an easier goal to attain, effortlessly putting all members on track to monetary benefit. And with a joint account, the savings are available should something occur to another account-holder.