Savings Accounts Are a Necessity to Life as You Know It

Written by: Seth Rogers
08/27/2019

savings-account

Savings accounts can also be used for an emergency fund, a down payment on a house, for large purchases and for college tuition. 

It is said that for an emergency fund you should have three to six months’ income saved. Large purchases and vacations have been the popular use of a savings account back from the sixties and seventies when banks offered savings accounts as Christmas savings or vacation savings accounts. It can be used to create your own savings account for college or for your children. It can act as a holding place for the money. 

The only problem with a savings account is that it is a place that just holds your money. It is not a place to for your money to grow. Most people think that savings accounts are good investments, but it has proved this false. Some state that cash is not an investment and a savings account hold cash. It is not a place to invest your money. You may earn interest on a savings account, but it is not enough to keep up with inflation. While a savings account is not an investment, you can still save up money in one in order to make a large investment.

It is easy to open a savings account. You can do this in person at a local bank. When opening one at a local bank be sure to take your identification card and the amount of cash needed to open it. You will also need to know your social security card. You can also open a savings account online. Most traditional banks allow for opening an account online. Then there are accounts that are strictly online. You will still need to provide identification. For the opening deposit you will need to prove a debit card or the bank account and routing number from your checking account. When opening by phone you will talk to a person in customer service who will walk you through the process.

Beware that even if you have the money to open a saving account, you can still be denied opening one. If you have bad credit, they can deny you. They can also deny you if you have a history of bounced checks and overdraft fees. It is also possible to get denied opening a savings account if your identifications are not enough.

When deciding on where to open a savings account there are some factors that you should look at? These factors are interest rates and fees. Take for instance you deposit a hundred dollars into a savings account. You make a 0.01 percent APY, but they also charge you a fee of five dollars a month. If you do not add more money but you just let it sit after a year the savings account would be worth forty dollars. You have paid sixty dollars just to let the one hundred dollars sit there. 

Most online savings accounts offer a 2.05 percent APY with no monthly fee. So, take that same one hundred dollars and put it in an online account. After a year you will have one hundred and two dollars in the account. You have earned two dollars. This may not seem like much, but it beats paying to let your money sit in the bank.

Credit unions offer different interest rates than a traditional bank or even come online accounts. It is best to shop around and choose the best one for your needs. Some credit unions offer different interest rates depending upon how much your initial deposit is.

Opening a saving account for a child can help teach them about the value of money. When they have a piggy bank, it is easy for them to take the money out. At a bank they can enjoy watching their money grow as they make deposits. With savings accounts a parent can talk to the child help the child make good decisions. The parents are the actual owners of a child’s account until the child turns eighteen. The only ones who can make changes with the account are the ones that are listed on the account. Opening an account for each child keeps the children from fighting over how much is whose money.

There are also advantages of having more than one savings account. You can have a savings account that is for emergencies only. Then you can have one for short-term goals and even another one for longer-term goals. Since savings accounts rarely keep up with inflation, it is best to use them for short-term goals. Using savings accounts can keep you from spending the money. Since you have to think about what you will use the money for and then you have to drive to the bank to get the money. This keeps you from frivolously wasting the money. To avoid a further temptation do not carry any cards for these savings account. When considering opening several savings account do not spread yourself thin. One account may be used for short-term goals. Once you have reached your goal and taken the money out just start saving for another goal.

After opening up a savings account you may have problems finding the money to deposit into it. They take the money out before you even realized it is gone. The key to savings is to set up a plan and make it automatic. Set up direct deposit from your paycheck. If you find that you cannot have the money drafted out of your account, then you may want to cut out unnecessary bills or even find a part-time job and put all that money into the account. You can even get a head start on savings by selling personal items that you do not use.

No matter where you open your savings account it is important that you save. You may not be able to put much into the account but even a little bit will grow. Once you start it is important that you keep it up.


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