Opening a saving account?
The savings account has been a long-standing financial tradition, both for families and individuals. Here’s the idea: You deposit some money with a bank, often times you agree to keep a minimum amount of money in the account, and over time you earn interest on the deposit. It sounds like a pretty sweet deal, but unfortunately savings accounts aren’t what they once were, and now many people are choosing not to use them at all.
The savings account has been a long-standing financial tradition, both for families and individuals. Here’s the idea: You deposit some money with a bank, often times you agree to keep a minimum amount of money in the account, and over time you earn interest on the deposit. It sounds like a pretty sweet deal, but unfortunately savings accounts aren’t what they once were, and now many people are choosing not to use them at all.
So does a saving still have a place in your financial planning? Here’s a look at the pros and cons.
Benefits of a savings account
Traditional savings accounts are easy to open. Typically it takes just a few minutes and can be done in person at a bank, over the phone, or even online. Often if you open a savings account alongside your checking account, you can save money on bank fees, but this benefit varies bank to bank. Most savings accounts require you to keep a minimum amount of money deposited, and some place restrictions on how much money can be withdrawn and how quickly.
The Federal deposit Insurance Corporation, or FDCI insures all savings accounts for up to $250,000, making them one of safest places you can store your money. This insurance means that even if your bank completely fails, you will not have to worry about losing your money, assuming there is $250,000 or less in the account.
The biggest benefit of this type of savings account is that the money is safe, that it is earning interest (however modest), and can be accessed relatively quickly. This makes a savings account the perfect place to store your emergency savings so you can quickly access them in the event of any type of urgent financial situation.
The drawbacks of savings accounts
Unfortunately, a savings account is also one of the least rewarding ways you can save your money. The interest you earn in a savings account is often very low, current ranging somewhere in between 1% and 2% per year. These rates vary from bank to bank, so you must check with the banks in your local area to find out the current rates. It is possible to find higher rates depending on your area and financial situation, so it is important to shop around when you are considering opening a savings account. No matter what rate you do find on a savings account, it will be much lower than you can get on other types of accounts and even many investor savings accounts.
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