A savings account is the most important asset to possess when pursuing financial independence. It is a safe way to have your money stay safe while earning a decent return. You can deposit and withdraw funds from your saving account with ease.
When you keep money in a bank account, you can get to it whenever you want. An emergency fund serves as a financial cushion when regular income is insufficient. Because a savings account is not the same as an investment, people should only save money they don’t need right away. You can spend the money right away or put it aside for later.
If you want to set up a savings account, you should research the interest rate, minimum and maximum balance requirements, and fees for having a zero balance. You should also be aware of any fees associated with using the various features of your account, such as writing checks, withdrawing cash from an ATM, and making deposits.
Here are the benefits of a savings account.
Your Savings Are Protected
If you’re a person who keeps their savings in a piggy bank or at home, you should consider that natural calamities such as fire or flood may occur. You would lose your money if that were to occur. Thieves can also break into your home and get away with your money. Keeping your money in a savings account guarantees that your savings are safe.
Federal Deposit Insurance Corporation (FDIC) insures savings accounts. The FDIC will insure up to $250,000 of your initial deposit as well as any interest earned on it. This safety measure can help you obtain more insurance because it applies to each account and each bank.
Your savings will be safe if an FDIC-insured bank goes out of business. FDIC would pay your saving directly to you, or a new savings account would be opened for you in another financial institution with the same balance as you would have in the previous account.
Your Funds Are Accessible
You can access your money easily in a savings account, unlike Certificates of Deposit (CDS), where you can’t withdraw your funds until the maturity date elapses. Putting your funds in a savings account means your money is always liquid and available. You could deposit the funds into your bank account and use a debit card or a check.
You can manage your account online and withdraw funds at any time if an emergency arises. As a result, a savings account may be a wise choice for storing funds in the event of an unforeseen expense. You should note that federal regulations may limit the number of withdrawal transactions you can make from your savings account in a given time, depending on the circumstances and the reason for your withdrawals.
You Earn Interest on Your Savings
Even though savings accounts do not provide as high a return as other investments, any money deposited into one will earn interest over time. If you have extra money, you can put it in a savings account towards your savings goal instead of a safe at home or a current account. These accounts offer different interest rates depending on the financial institution you choose.
If you need a higher rate of return, look into high-yield savings accounts. Some of these accounts may have a minimum starting deposit or balance requirement.
With a savings account, you keep the interest you earn until you withdraw your funds. This will make your account grow steadily, and in the end, you will notice a significant boost in your funds.
Most people fail to meet their savings goals because they have to make deposits and withdrawals by hand, which is time-consuming and inconvenient. It would be best if you prioritized saving for your financial goals because you must pay for necessities such as rent and food. One of the most important features of most savings accounts is the ability to make direct deposits. You have complete control over the amount and timing of money transfers, but most people do so on the day they are paid or once a month. Setting up automatic payments is wonderful because they help you systematically achieve your financial goals. You will no longer notice it if you add the amount of your automatic savings to your monthly budget.
Inculcates Financial Discipline
If you store your money in a safe at home, it will be much easier to access. Having very easy access to the money will encourage you to spend them on unnecessary expenses, thus causing a setback in your savings goal. On the other hand, if you own a savings account, you will only spend your money on necessities. It will also assist you achieve your financial goals. If you need financial discipline, consider saving in a savings account.
Savings Accounts are Easy to Open
Opening a savings account is a very easy process. You will need to walk into a bank branch or a credit union. You can also set up an account online if your chosen financial institution offers online banking services.
You will be required to give your full name, phone number, address, and passport photo. You will provide your Social Security Number (SSN) for taxable interest purposes.
Most banks and credit unions will ask you to deposit between $25 and $100 to open a savings account. Others will let you set up the account and deposit it later.
A savings account may look like nothing but it greatly impacts our finances. You should extensively research the type of account you need and the institution you want to set up your account. Take advantage of these accounts’ interest, security, and accessibility to achieve your financial goals.