The Advantages of a Savings Account
Any sound financial plan needs to include the regular habit of saving. A realistic budget and healthy attitude towards money are crucial to achieving your financial goals and enjoying a debt-free lifestyle. Without adequate savings, you are on shaky ground when it comes to your money.
If you have never been a saver it may seem like an impossible task to start. But with careful planning, you can begin to put away money for both short and long-term goals and also to help you deal with life's unexpected financial emergencies (which usually happen at the worst possible time).
One of the keys to financial security is not taking on new debt every time an unplanned situation arises- such as a broken water heater or a medical emergency. Having funds to fall back on can relieve the constant stress of worrying about how you will pay for an unexpected monetary need.
Regular savings accounts are not known for earning high interest rates but they do offer various benefits that other types of savings options do not. The following advantages are worth considering when you are searching for smart savings account choices.
- Easy Access. Regular savings accounts, as well as money-market accounts, allow you to withdraw your funds at any time. You can generally make these withdrawals at the bank (with a teller), by mail, or by using an ATM. Some Federal regulations limit the number of withdrawals you can do each month so you should check with your specific bank regarding these rules. But the important benefit here is that your money is available immediately - which is what you want and need if a financial emergency occurs. CDs (Certificates of Deposit) and most long-term investment options do not offer this.
- FDIC or NCUSIF Insured. Your money is extremely safe in a savings account or money market account, making it a great choice for secure saving. Depending on if your money is in a bank or credit union, the Federal Deposit Insurance Corporation, or FDIC, or the National Credit Union Share Insurance Fund, or NCUSIF, will insure your savings account money up to $250,000. If your bank or credit union ever fails, your funds are fully protected.
- Great Place to Start. If you are just beginning to save, a regular savings or money-market account can be the perfect place to start. Generally there is no minimum amount of cash required to open an open but be sure to get all the details from your personal bank or credit union. You should check to make sure there is no monthly service charge if you don't maintain a certain balance. Always read and understand the account details (such as fees) before opening any type of savings account.
- High-yield savings options. Some savings accounts do offer higher interest rates than others. Many times these are available only online. If you are able to do all of your banking via the Internet you may see significant returns on your money when compared to using a local bank branch. Investigate all the available options before making your final decision.
Savings accounts are a great way to get in the habit of saving. One of the smartest things you can do for yourself financially is "pay yourself first". Think of the money you deposit each month (or each paycheck) into savings as a regular bill. Consider setting up a direct deposit from your salary each pay period to be deposited into your savings account. Start with a small amount if necessary- 5% is a good starting point. Whenever you are able, increase the amount you save.