Do you remember that old phrase, “It’s best to save for a rainy day?” While that phrase is a metaphor for having savings for financial hard times, it applies to your daily life. You need savings because you never know when you will face hardship in today’s increasingly competitive and uncertain global economy. You need a savings account to deposit this money in. Read this article to learn more about benefits savings account.
Do you know what an SB account is?
You may or may not be familiar with the term SB account. It stands for a savings bank account. You deposit funds in it for a rainy day once you set it up. A unique feature of this account is that the bank will pay an interest rate on your savings. You’ll have a moderate interest rate with this account.
What are some savings account benefits?
Some savings account benefits include
- The ability to earn interest income. Since the bank will pay a certain fixed interest rate on your savings, you can watch your initial investment grow over the years.
- The ability to access your money at any time. You can withdraw from your savings account to pay for expenses arising from that unexpected flat tire.
- You can’t lose anything. Since banks are backed by the federal government, you can’t lose your hard-earned money in an economic downturn. The same is not true of the stock market.
Why have a savings account?
The purpose of savings account is to segregate your funds. The money in your savings account will not be intermingled with the money in your checking account. Additionally, savings accounts keep your funds secure.
What are the advantages of saving account
The advantages of saving account are numerous. Some of them are:
- You don’t need a lot of funds to open a savings account. Did you know that all you need is $25 to open a savings account? Well, you can save that amount by not buying Starbucks for a week!
- You can pay your bills automatically from your savings account. This saves you the hassle of mailing a check to your electricity provider.
Obviously, the advantages of savings account good and numerous enough to outweigh the disadvantages of not having one.
What are the benefits of savings?
There are many benefits of savings. One is to have it serve as an emergency fund should you lose your job and experience a time lag in finding another one. This saves you from the headache of taking out personal loans from friends, relatives, and family members. You also don’t have to face the exorbitant interest rates that payday lenders impose. You can also use money from your savings account to pay your regular bills. You will avoid the interest you would accrue if you paid them using your credit card.
Savings account advantages and disadvantages
Savings accounts advantages and disadvantages are as follows:
- They are a great way to create and preserve wealth since they are secure and they can be passed down the generations.
- You can make money off of them through their interest rates. Though modest, all savings accounts have an interest rate that the bank will pay.
- You need to have a certain amount of money in the account to keep it active
- Its interest rates are lower, therefore you won’t make as much money as you would by investing in the stock market. Additionally, other investment instruments like money market funds and bonds have higher interest rates. While higher risk accompanies higher interest rates, your earning potential through the interest rate is much greater.
- You can only take your money out a certain number of times a month. The federal government limits your withdrawals to six a month. If you have withdrawn the sixth time for a particular month and need money because of unexpected window breakage, you will need to find another source of income
What are savings accounts used for
You may be thinking to yourself, “this is good information, but I wonder what are savings accounts used for?” Well, you can withdraw money from your savings account to pay for that four-day road trip to the Grand Canyon that you had always dreamed of. You can also put away money to pay for unanticipated extra expenses like fixing bad brakes. In fact, this is the main purpose of having a savings account.
How is a savings account most useful?
Many people ask the question, “How is a savings account most useful? Many people love savings accounts because they can easily withdraw funds to pay for emergencies like an unexpected $1,000 bill to the emergency room. Savings accounts are also useful if you need a steady source of cash and don’t want to touch the money in your other accounts. Since the money in your savings account earn interest and is safe, you can use it to preserve wealth.
Disadvantages of saving account
While savings accounts are useful, they are no Godsend.They have their disadvantages. The disadvantages of saving account are:
- You aren’t going to make much money off of them because of their low-interest rates.
- You need to have a certain amount of money in your account at all times to avoid bank-levied fees.
Advantages and disadvantages of certificates of deposit
The advantages and disadvantages of certificates of deposit are numerous:
- You don’t need a minimum amount of funds to keep the certificate active. You can also choose between short and long-term CDs
- You make more money off of them because of their higher interest rates which the bank will pay
- You can’t access your money any time you want to
- You may actually lose money because the interest rate of CDs does not automatically adjust for inflation.
Savings accounts are the way to go
Savings accounts are more than just emergency fund buffers, they are designed for you to lead a fiscally disciplined life!