Vulnerable farmers lack the financial resources to invest in crop production, and formal savings can be a financial mechanism useful for increasing their financial resources. Moreover, a lack of financial literacy often results in the waste of harvest proceeds, while if harvest proceeds can be saved through formal banking channels, farmers can invest more in the next harvest and thus may produce more crops. However, the empirical evidence of such an impact is limited. Thus, this study explores the impact of saving through formal banking channels on the welfare of Malawian farmers. As the formal savings decision is not random but self-selected, a randomized encouragement design is applied as the identification strategy, in which individuals are invited to receive their harvest proceeds through a formal savings account as the encouragement or instrumental variable (IV) to estimate the local average treatment effect. The findings indicate that formal savings increase total savings, agricultural investment, crop production, and crop sales. This study provides policy implications for targeting formal savings as a policy tool for providing farmers with more financial resources to invest in crop farming and enhancing farmer welfare.