There are plenty of good reasons to open a savings account. Not only do these accounts pay interest on the money you’re not using, but your deposits are protected for up to $250,000 per depositor, per bank. (And let’s face it — that’s a pretty generous cap.)
But there are plenty of other reasons to love savings accounts. Here are some important benefits that savers commonly reap, according to a recent report by the Consumer Federation of America.
1. Easy access to money
When you have money in a savings account, you can access it at any time. Need to pay for a car repair? Just head on over to your bank for a withdrawal.
This is one benefit that savings accounts have over certificates of deposit. With a CD, you’ll be penalized to the tune of several months of interest payments for taking a withdrawal before the CD’s term is up. And you generally can’t take a partial withdrawal from a CD — you either need to cash it out entirely or leave it alone. With a savings account, you can take out money at any time, and any interest you’ve accrued to date is yours to keep.
2. The option to pay no fees
Many savings accounts today come with no hidden fees or charges. Of course, it’s always important to read your banking agreement before opening a savings account. But banks today commonly make it pretty easy to avoid savings account fees (checking account fees can be a little harder to avoid, though that’s possible as well).
3. A dedicated source of emergency cash
Many people use their savings account as an emergency fund — money to tap when unplanned bills arise or when jobs are lost. It’s possible to keep emergency cash reserves in another type of account, like a checking account. But doing so means you’ll miss out on the chance to earn interest on your money while you don’t need to use it. Similarly, you could house emergency savings in a CD, but then you’ll risk losing out on interest you’ve earned if you need to cash out a CD early.
4. Less temptation to spend
Many people are less likely to take withdrawals from a savings account to pay for everyday items than they are to take a withdrawal from a checking account for that purpose. Often, the mere fact that these accounts are labeled “savings” can inspire responsible behavior.
Are you ready to open a savings account?
If you don’t have a savings account yet, it’s time to get started. Some features you’ll want to look at are:
- Interest rates being offered, as these can vary from bank to bank
- Account minimums (some savings accounts require you to keep a certain amount of money in the bank to avoid fees)
- Monthly fees (it’s best to find accounts that don’t charge these)
- Automatic transfers, so you can send money from checking to savings with ease
It pays to look at different accounts before opening one up. Comparing your choices will help you find the right place to put your money.
Where should you park your cash during the pandemic?
In uncertain times, it’s a savvy move to ensure your money is safe. But many Americans are missing an opportunity to safeguard their money and are missing out on guaranteed returns as their money languishes in a big bank savings account.
You can rest easy putting your money into one of the best online savings accounts where your money is FDIC insured. Best yet, The Ascent’s top online savings accounts picks dish out a whopping 8x more interest than the national average.
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