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Should you finally open up a savings account? It’s a good financial plan! Find out the main benefits that come with using savings accounts to see why.
They Are Accessible:
The funds sitting in your savings account are fairly accessible. You can withdraw or transfer them at any time without having to wait for the approval. They are your funds to do with as you choose.
Other types of accounts will require some patience or effort to gain access to funds. For instance, a certificate of deposit will help certain savings grow with interest over time, but you will have to wait for the account to “mature” before it becomes accessible — that could be 10 years’ time! If you want to access those funds beforehand, you will have to pay an early withdrawal penalty. The process won’t be as straightforward as using a debit card or setting up an online transfer.
Or consider a personal line of credit loan! If you don’t have enough savings to cover an emergency expense, then turning to a website like CreditFresh to apply for a personal line of credit loan is a convenient potential short-term solution. With a line of credit loan, you could use borrowed funds to manage the expense in a short amount of time and then focus on a steady repayment plan afterward.
However, this solution isn’t instantaneous! You will have to confirm that you meet all of the qualifications for a personal line of credit loan beforehand. If you do, you can fill out the application online and wait to see whether you get approved. Only if you get approved can you access this option. If you don’t get approved, you will have to turn to an alternative method for covering your emergency expense.
They Discourage Overuse:
Savings accounts typically have a limit on how many withdrawals or transfers you can make per month. This is to encourage you to make contributions and save your funds, not use them all in a short amount of time. You will not have this limitation for impulse spending through your checking account or through a collection of paper bills.
They Encourage Growth:
A standard savings account will come with a small interest rate that should help your balance grow slowly over time. The higher your balance, the more interest you will accrue.
To speed up growth, you should consider moving your savings into a high-yield savings account. A high-yield savings account has a higher interest rate than a standard savings account, which results in a higher APY (annual percentage yield).
They Are Low-Risk Investments:
Savings accounts are automatically insured by the Federal Deposit Insurance Corporation (FDIC). The first $250,000 in a user’s savings account is insured by this corporation. Considering how the average American’s savings account contains less than $250,000, the majority of bank users are fully covered.
What does this coverage mean? It means that if your bank fails and closes, your savings will be safe. The balance that you have sitting in your savings account will be given to you, or it will be transferred to a new savings account at a different institution. That money won’t disappear.
They Are Easy to Track:
The funds sitting in your savings account don’t have to remain a mystery. With the help of online banking apps, you can check your balance whenever you’d like. Many popular budgeting apps can sync with your bank accounts, giving you real-time updates about deposits and withdrawals.
Savings accounts can offer all of these benefits and more. It might be time for you to sign up for one.