With there being something new and pretty, or wholly utilitarian, that we end up buying every now and then, we tend to save lesser and lesser. Nearly 6 out of 10 Americans have little to no savings. That’s not a very good scenario, especially if one is in an emergency of any kind. Not just that, there is a certain freedom associated with an adequate amount of savings. To help you achieve this goal, a savings account is the way to go.
While it may be tempting to have a checking account to regularly use your funds, have transactions, and the like, if you are looking to build a corpus in the long run, you should consider a savings account.
With a savings account, you can deposit your money, keep it safe, and earn interest on it as well. There are several FDIC-insured banks of credit unions insured by the NCUA where you can open a savings account.
Moreover, there are several advantages of using a savings account. Here are a few of them to check out.
- You earn interest
Savings accounts give you a strong incentive to save your extra money by offering interest on your deposits. If you have a large amount of money saved up, you might also have to pay some tax on the interest that you earn. Despite that, savings accounts offer a good opportunity for you to grow your money without having to go the extra mile. - They offer high liquidity
When compared to financial instruments like Certificates of Deposit (CDs), savings accounts provide more flexibility and liquidity. With a CD, there is a fixed tenure at the end of which, your investment matures, and you are allowed to withdraw your funds. If you attempt to withdraw your investment before that, you might have to pay a penalty. With a savings account, as per law, you are permitted six withdrawals every month. - They are long-term
If you want to save for the future, then savings accounts are at the top of the list of options. There are several alternatives, but investing in stocks or mutual funds also carries an element of risk that might not be suitable for everyone. If you’re looking for a consistent rate of return with minimum risk, then savings accounts are the way to go. - They are often insured
If you have a savings account with an FDIC- or NCUA- insured bank or credit union respectively, then you are protected from any failure on account of the bank to a limit of $250,000 per account owner per category. And, unlike investments, savings accounts can be FDIC- or NCUA-insured. FDIC (or NCUA) insurance means that, even if your bank fails, your savings are protected up to certain limits ($250,000 per depositor, per account ownership category). - They are available for different purposes
If you’d like to simply save your money, then you can choose to open a Standard Savings Account. There are also High-Yield Savings Accounts for those looking for a higher rate of return. Similarly, there are Kids and Student’s Savings Accounts for younger people. There are also those meant for a specific purpose. There are Money Market Savings Accounts that give you the best of both checking accounts and savings accounts. So, it all starts with what you want and why you want a savings account.
Once you have decided on that, you can choose from among the options available to you. Are you saving to buy something? If it’s big, then you might need to write a check, and you might want to open a money market account. You also need to keep a close watch on how much money you are going to save and whether there is a minimum requirement and if you can abide by it.
