Saving money is one of the crucial needs in this time; people may save for numerous reasons. When you deposit your savings in a savings account, you are in a better position to manage your funds.
It is a common behavior of every individual to spend money when they have it at home. However, nowadays the inflation rate has taken a toll globally and savings have become a very important part of everyone’s life. If you have certain goals, set for some purposes to achieve in the future you must save from today. A savings account plays a significant role in the concept of promoting the act of saving money. You can easily deposit the extra cash every month in your account and forget about it. This way you can accumulate a good amount of sum that may be used for serving many different purposes of yours.
How Does a Savings Account Work? (i)
The working mechanism of a savings account is pretty simple. It is different from the basic checking account in a way that you do not make repeated withdrawals using cheques and ATMs, although this facility exists with a savings account. There are certain rules and regulations that you must follow when it comes to operating a savings account regard your money and savings account interest rates help you gain some earning on the money you have in your account.
Why Have a Savings Account?
Many people think that by way of having a checking account they may accomplish their goals of saving money. However, this is not the case at all, a checking account will give you an ATM and debit card with no minimum balance maintenance limit so you are at a free will to withdraw money anytime you want. However, with the savings account you are at liberty to enjoy a significant amount of accumulation at the end since you are not able to withdraw money at all times. Some other benefits that you may enjoy by having a savings account may comprise of the following:
Safety of Your Cash
Many people have a habit of saving money at home, but that is not safe. Sometimes theft may make you lose your money and at the same time, you might also end up using the entire savings. When you know that you have money at home, you may be tempted to spend that sum on useless stuff. However, when you have money in an account you won’t be able to spend unnecessarily because you have nothing in your hand. In addition, the sum of money kept at the bank is insured so even if theft or robbery takes place at a bank your money will still be safe which may not be possible at home.
Available in Liquid Form
Many people also prefer opting for different investment certificates out of their savings. This may not be in the form of liquid cash and requires waiting when needed in an emergency. Whereas, your savings account will hold your cash in a liquid form so in case of emergency you can easily withdraw money even overnight.
Earning Interest Multiplies Money
Most of the high yield savings accounts help you earn a good chunk of money on the saved investments. The more money you invest in these accounts the more will be your interest earning. This helps you quickly grow your investment apart from what you add on your own in the accounts.
Small Initial Investment
The investment required to look forward to savings accounts options is very less, you don’t need a huge sum initially to make any kind of investment in the savings accounts. Therefore, even if you have a limited amount of money you can get yourself a savings account opened up and you can easily get yourself a new means of earning through interest.
Savings on Monthly Fee
By way of maintaining a certain balance, many banks offer a service of no monthly fee savings account. This allows people to enjoy having a hands-on account with no deduction of fee from their balance that helps them enjoy a service free of cost from the end of the bank.
Ease of Access
You can easily withdraw money whenever you need without any hassle, you are provided with an ATM card that allows you easy withdrawals, and also many people even get their bills paid through their savings accounts. This could be advantageous in cases when you need immediate money in case of an emergency, which is not possible by way of having any kind of investment certificates because they take time to mature, and before that cannot be liquefied.
Downsides of Savings Accounts (ii)
As everything has advantages, you have to come across the disadvantages as well. A savings account has its downsides that you must keep a check on and a few of these may comprise of the following:
- Many savings accounts restrict withdrawals; you have to keep a minimum balance maintained to enjoy the benefits of a savings account. By way of not having that minimum balance maintained, you may not enjoy savings on a monthly fee.
- When you compare the interest rates of a savings account with other forms of investments, you may find the rate of interest being very low.
- These days many accounts offer withdrawals methods for the savings account and when you know you can withdraw money savings might be hindered due to your temptation of using money since there is no lock on withdrawals.
- Inflation has a lot to do with your savings account interest rate and it makes it fluctuate very quickly. This means that you won’t have a stable earning of interest by your side.
A savings account offers a lot of utility and people who would like to earn a limited chunk feasibly might opt for the savings account. However, when opening it up it is very important to have an eye on the pros as well as the cons of a savings account so that a fair decision may be made regarding having it in the first place.