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Why You Should Open a Savings Account

Why You Should Open a Savings Account

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Savings are an integral part of financial security. They provide a safety net in case of job loss, divorce or unexpected expenses.

Savings accounts, unlike checking accounts, are designed to grow money and provide interest. They also offer federal protection of up to $250k per depositor per account type in an FDIC-insured bank or credit union.

1. It’s a great place to stash cash you don’t plan on spending right away.

Savings accounts are ideal for stashing cash you don't plan on spending immediately. Think of them as stores that tempt you with expensive items but keep you from purchasing until your cart is full.

Savings accounts can be an excellent way to save for major purchases like vacations or new cars. With automatic transfers from checking to savings or bank tools and services, it's easy to set up regular deposits into your savings account.

When saving for something large, high-yield savings accounts might be your best bet. These accounts typically offer interest rates similar to three and five year Treasury bonds and they're federally insured up to $250K per depositor.

However, they often require a higher minimum balance requirement than traditional savings accounts and may charge you an extra fee for withdrawing money from an ATM.

Savings accounts that earn interest are ideal for emergency funds, as they provide protection from financial crises and help cover unexpected expenses. A savings account that covers three to six months' worth of expenses is ideal, but any amount can help keep you from depleting your wallet and taking on debt.

However, you should make sure your savings account meets your financial priorities and needs. You might want to explore other federally insured places like a certificate of deposit (CD), which typically offers higher annual interest rates but requires you to commit for an agreed-upon amount of time.

One option for savings is a money market account. These accounts usually offer higher interest rates than savings accounts and are federally insured up to $250k per depositor; however, they often come with higher minimum balance requirements.

Finally, set a savings goal with your savings account. Whether it's saving for a family trip, down payment on a home, or emergency fund - having an objective in mind can help keep you focused and make them easier to achieve. Some banks even provide features like hiding the balance on your account so that it's less tempting to spend it before reaching your objective.

2. It’s a great place to stash cash you don’t plan on spending right away.

Savings accounts are ideal for stashing cash that you won't spend right away. They're safe, easy to get to and earn interest.

According to Bankrate, the Federal Deposit Insurance Corporation (FDIC) insures savings deposits up to $250,000 per person. That means if your bank goes out of business, your money is safe.

Most savings accounts offer compound interest, meaning the more funds you put into an account, the larger it will grow over time. This can be a powerful incentive to save.

Savings accounts tend to have higher liquidity than certificates of deposit (CD), allowing you to withdraw your funds without incurring fees or penalties. This can help protect against taking a loss when unexpected expenses such as car repairs or major home renovations crop up.

Another advantage of a savings account is that it's meant for long-term goals like taking a vacation or paying down the mortgage. Since these accounts usually have limits on withdrawals, make sure you create an effective budget to reach these objectives.

According to Matjanec, it's wise to have three to six months' worth of expenses saved up. That way, you can cover any unexpected bills or emergencies that may arise.

However, some people require more space than that - particularly those with mortgages, rent or car insurance. In such cases, you might want to consider stashing more than three months' worth of expenses into a checking account that can better handle day-to-day transactions.

High-yield savings accounts are an attractive choice for those with cash to spare and short-term financial goals. These types of accounts offer higher annual percentage yields (APYs), which have been steadily rising over recent years.

High-yield savings accounts currently boast an interest rate of 1600% higher than the average savings account, making them the perfect place to stash cash for future needs while earning some extra income. Saving and investing your money is always the best way to ensure you can afford what matters most in life.

3. It’s a great place to stash cash you don’t plan on spending right away.

If you need to save some cash for an important purchase, emergency, or long-term goal, a savings account provides the secure place to store it. Plus, the federal government insures these accounts so if they get lost or stolen, most often you can recover them.

Savings accounts offer the added bonus of interest, so the longer your money stays in there, the higher its growth. That makes them ideal for short-term goals like emergency funds or down payments on homes.

Bankrate recently reported a 1600% higher interest rate on high-yield savings accounts versus the average savings account, meaning you would earn approximately $400 annually in interest from investing $10,000 into one.

These accounts are an excellent way to build up an emergency fund, as they require a higher minimum balance, restrict withdrawals and provide debit card and checkbook access. This means you can quickly access your funds when something unexpected occurs such as break-ins or need for replacing air conditioners.

Additionally, some high-yield savings accounts don't charge fees and often pay higher interest rates than traditional savings accounts. This means you can build up your emergency fund faster with a high-yield savings account than with another type of account.

Before opening a savings account, it is important to consider the type of money being saved, how long it will remain in the account and the bank's fees and minimum balance requirements. Some banks and credit unions charge monthly maintenance fees for savings accounts so research all options available before selecting one that works best for your needs.

Savings accounts that offer high interest and low fees are the best options, but other factors like customer service and convenience should also be taken into consideration when selecting one.

According to Alex Matjanec, co-founder of banking comparison site MyBankTracker, some people prefer having both checking and savings accounts because it provides security knowing there's somewhere to stash money they don't plan on spending right away. That may be especially true if you have a lot of debt or spend a considerable amount on daily expenses. On the other hand, if your savings account is large enough, keep it separate from your checking account so as not to become an easy target for unnecessary costs or indulgent temptations.

4. It’s a great place to stash cash you don’t plan on spending right away.

Savings accounts are ideal for storing cash you don't plan on spending immediately. They pay interest, which can help your funds grow faster than with other types of financial accounts.

Cash can be safely stored here without fear of theft or fire damage, since the Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per person at one bank.

Another reason you should have a savings account is to prepare for unexpected expenses. Whether you have an upcoming child, are planning for an expensive vacation, or simply need extra funds in case of emergencies, saving up some extra can go a long way towards covering these costs.

For instance, if you're planning to purchase a new car next year, it might be wise to set aside enough money each month as your down payment. Doing this helps the cost seem less overwhelming and overwhelming.

Saving up for a down payment on your next home can be done similarly. Divide the total by 12 to get an estimate of how much you need to save each month, and then transfer any remaining amounts into a savings account.

Before signing up for any type of savings account, do your due diligence and research the services available from banks and credit unions. Choose one that meets both your individual needs and budget, then look for an account with a high annual percentage yield (APY), which is the amount of interest earned on money in your account. With these accounts, you won't miss out on anything!

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