Savings Accounts have existed for a considerable period of time. In some ways, they have fallen out of favor to more fancy and exciting options. The basic premise of a savings account is a place to put your extra money until you need it. This blog will examine all the many aspects of a savings account and how to take advantage of its benefits and avoid its weaknesses.
You will probably never see headlines about savings rates going up and down. They are not the stock and bond market. Savings accounts are a simple and tried and true way to park your money for a variety of reasons. Let’s take a look at the pros and cons of the accounts.
WHO SHOULD OPEN
It is probably a good and smart decision for everyone to have a savings account. They are simple to open. Every bank and credit union will be glad to open one for you. Of course, like most aspects of life, there will be options on the internet.
If you have access to a credit union through your or your spouse’s employment or military service, that is a good option. They typically pay better interest rates which we will look at further later on.
It is especially a good idea for a young person to open a savings account as their first financial step. Deposits can be made from birthday or Christmas money or any other way a child can receive money. It is a good feeling to look at that account and say, “that is my money.”
So, start your journey through the financial world with a savings account.
INTEREST RATES
It does not take long to discover that interest rates vary from bank to bank and credit union to credit union. If you browse the internet, you will see advertisements that offer what appears to be higher rates than the competition.
It is certainly true that a small increase in rates will multiply over time. However, you need to find out how and when the rates change. You do not want to be trapped into an account with a temporary higher rate that drops quickly.
I would suggest you concentrate more on a financial institution that is easy to access and offers you comfort rather than a small increase in interest rates.
SAFETY
All savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC). This is an agency that was established to grant depositors comfort knowing that a bank failure or any other emergency event would not result in the loss of funds.
It is very important to note that the institution where you open your account is a FDIC institution. If you go in person there is usually a sign indicating FDIC. If you go online make certain that protection applies.
This protection was established in 1934 as a result of people losing their money during the depression and bank runs. Today the limit is $250,000 per account.
I am sure when you saw the limit listed above, you thought I would never get my account anywhere close to that number. Money would be moved to buy a house or a car or make some other financial decision. The purpose of listing the limit is for information purposes so you are well informed.
PERIODIC DEPOSITS
It is a good idea to establish periodic deposits into a savings account. Some standard advice is to pay yourself first. In other words, when that paycheck hits your checking account, transfer a predetermined amount into your savings account as the first bill paid.
The reason for this long-established procedure is the fact that if you pay yourself last you may not have any money left. Take heed and make a commitment to a reasonable sum to pay every payday.
If you have the ability and expertise to set up an automatic transfer this would be an excellent idea. It takes the temptation to spend the money somewhere else instead of increasing the sum of money in the savings account.
DOWNSIDE
The downside people always hear about savings accounts are you can earn so much more money by buying stocks, bonds, or any other current popular investment. That is true.
There is a risk in all those ventures. They are not insured. The values can change rapidly in some cases like stocks. You can make more money in one day than one year in a savings account. Of course, the opposite is true.
You can have both worlds. A savings account and stock investments are not mutually exclusive. It is just important to keep that savings account growing. In a financial emergency, you can easily access the savings account for that plumbing repair. It may be a bad time to sell the stock when the need arises.
VERDICT
It is always good advice to open and maintain a savings account. Make those periodic payments as outlined above, and do not miss one. You will be amazed by how fast the balance will add up without even taking into account the interest earned.
Do not let anyone tell you that a savings account is a mistake. When you need new tires to pass the annual inspection, money is that account can be a real stress reliever. That is what the savings account was designed to do.
We have examined some of the aspects of a savings account. I hope you have come away with the motivation to open an account. If you already have one, make it a practice to put money in on a regular basis.
Finally, make sure the location of your account is insured and offering a competitive interest. You will be glad to have they security of knowing money is available and growing.
Savings Accounts have existed for a considerable period of time. In some ways, they have fallen out of favor to more fancy and exciting options. The basic premise of a savings account is a place to put your extra money until you need it. This blog will examine all the many aspects of a savings account and how to take advantage of its benefits and avoid its weaknesses.
You will probably never see headlines about savings rates going up and down. They are not the stock and bond market. Savings accounts are a simple and tried and true way to park your money for a variety of reasons. Let’s take a look at the pros and cons of the accounts.
WHO SHOULD OPEN
It is probably a good and smart decision for everyone to have a savings account. They are simple to open. Every bank and credit union will be glad to open one for you. Of course, like most aspects of life, there will be options on the internet.
If you have access to a credit union through your or your spouse’s employment or military service, that is a good option. They typically pay better interest rates which we will look at further later on.
It is especially a good idea for a young person to open a savings account as their first financial step. Deposits can be made from birthday or Christmas money or any other way a child can receive money. It is a good feeling to look at that account and say, “that is my money.”
So, start your journey through the financial world with a savings account.
INTEREST RATES
It does not take long to discover that interest rates vary from bank to bank and credit union to credit union. If you browse the internet, you will see advertisements that offer what appears to be higher rates than the competition.
It is certainly true that a small increase in rates will multiply over time. However, you need to find out how and when the rates change. You do not want to be trapped into an account with a temporary higher rate that drops quickly.
I would suggest you concentrate more on a financial institution that is easy to access and offers you comfort rather than a small increase in interest rates.
SAFETY
All savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC). This is an agency that was established to grant depositors comfort knowing that a bank failure or any other emergency event would not result in the loss of funds.
It is very important to note that the institution where you open your account is a FDIC institution. If you go in person there is usually a sign indicating FDIC. If you go online make certain that protection applies.
This protection was established in 1934 as a result of people losing their money during the depression and bank runs. Today the limit is $250,000 per account.
I am sure when you saw the limit listed above, you thought I would never get my account anywhere close to that number. Money would be moved to buy a house or a car or make some other financial decision. The purpose of listing the limit is for information purposes so you are well informed.
PERIODIC DEPOSITS
It is a good idea to establish periodic deposits into a savings account. Some standard advice is to pay yourself first. In other words, when that paycheck hits your checking account, transfer a predetermined amount into your savings account as the first bill paid.
The reason for this long-established procedure is the fact that if you pay yourself last you may not have any money left. Take heed and make a commitment to a reasonable sum to pay every payday.
If you have the ability and expertise to set up an automatic transfer this would be an excellent idea. It takes the temptation to spend the money somewhere else instead of increasing the sum of money in the savings account.
DOWNSIDE
The downside people always hear about savings accounts are you can earn so much more money by buying stocks, bonds, or any other current popular investment. That is true.
There is a risk in all those ventures. They are not insured. The values can change rapidly in some cases like stocks. You can make more money in one day than one year in a savings account. Of course, the opposite is true.
You can have both worlds. A savings account and stock investments are not mutually exclusive. It is just important to keep that savings account growing. In a financial emergency, you can easily access the savings account for that plumbing repair. It may be a bad time to sell the stock when the need arises.
VERDICT
It is always good advice to open and maintain a savings account. Make those periodic payments as outlined above, and do not miss one. You will be amazed by how fast the balance will add up without even taking into account the interest earned.
Do not let anyone tell you that a savings account is a mistake. When you need new tires to pass the annual inspection, money is that account can be a real stress reliever. That is what the savings account was designed to do.
We have examined some of the aspects of a savings account. I hope you have come away with the motivation to open an account. If you already have one, make it a practice to put money in on a regular basis.
Finally, make sure the location of your account is insured and offering a competitive interest. You will be glad to have they security of knowing money is available and growing.
){kind=link}