Having a savings account can make it easier to save money for the times that you need them the most, and it’s a great way to earn interest on it at the same time. This type of account does limit the number of withdrawals each month, as it’s designed to help you save money instead of spend money.
If you’re looking to start a “rainy day fund” or you just want to start saving for that special moment, this is the most ideal option. However, if you’re looking to have a higher level of access to your funds frequently, it might be best to look into a checking account.
How Savings Accounts Work
Your initial deposit is usually low, and the interest you earn is dependent on the APY (Annual Percentage Yield) set forth by your financial institution. Keep in mind that interest rates tend to fluctuate dependent upon the state of the economy, unlike CDs which lock in a set interest rate for the long-term.
You can usually get up to 6 withdrawals per month, but if you exceed this limit you will be subject to fees set forth by your bank of choice. As far as depositing money, you can do it automatically (by setting a certain amount to be deposited every so often) or you can do it manually which helps you decide how much is deposited each time you decide to make a transfer.
The Benefits of Having Your Own Savings Account
Below, you’ll see the best benefits of having this type of bank account. Keep in mind that these are just the leading benefits, and your financial institution may provide you with more than what we’ve listed.
· Access your money at any time via an ATM.
Using the debit card that was provided to you upon opening your savings account, you can access the funds at any time of the day or night. Other types of investment accounts can often tie up your money and make it harder to get to. For emergencies, this is one of the best options available without throwing away the chance to let your money grow (even if it grows slowly).
· Interest will be paid out on the funds within your account.
The amount that you earn is smaller than with other forms of investment, but this is meant to provide consumers with a safer option. Not only is it an account that keeps your funds separate from the funds used to fund you throughout life, but it’s also one that truly works for you.
· Unlike other investments, it comes with less of a risk.
When you choose to use a savings account to save up your money, you embrace a lot lower risk than mutual funds, stocks, or other types of investment accounts. For those who can’t afford to take a loss if things go downhill, this is the most ideal route to take.
As you can see, this is a great opportunity to save money. It’s recommended that you aim to keep at least $500 in the beginning and then add to it regularly. This will ensure that you have a financial cushion that you can depend on if things get rough in the future.