Save Your Money With a Personal Savings Account
When people think about investing their money, they usually only consider stocks, bonds, real estate, and other investment ventures. Although the returns for them are high, the risks that accompany them are sometimes too big for an average individual.
You may not realize it, but having your own savings account can be considered an investment. Before we continue with the kinds of benefits you’ll get, you need to know what a savings account is.
Savings Account Defined
A personal savings account is one of the first basic accounts you can open with any bank or credit union. It is essentially a deposit account where you can place the money that you do not plan on spending right away. You can open one for emergencies or your children’s college fund.
Savings accounts are different from checking accounts. A checking account can help you with your daily finances like paying bills, buying groceries, and more. The money you place in checking accounts can be accessed via checks, ATMs, and electronic debits. Savings accounts, on the other hand, are for long-term investments and emergencies. Both of these can help you manage your finances.
Benefits of a Personal Savings Account
Savings accounts can help you achieve your long-term financial goals and needs. Let’s look at some ways you can benefit from having one.
- Start Saving Money Easily
It’s easy to save money with a savings account. Depending on the bank or credit union, opening a new account can cost as little as $25 or less. All you need to do is provide identification and complete the necessary forms, along with the minimum opening balance. Due to the development of technology, this process can easily be done online as well. Once the account is approved, you can start depositing money in it immediately.
- Easy Access to Money
Unlike stocks, real estate, and other types of investments, you have easier access to your finances when they’re deposited in a savings account. Whenever you need to use the money for an emergency, you can get it via any available ATM. However, keep in mind that because of Regulation D of the Federal Reserve, most banks limit your monthly withdrawals. Some banks only allow up to six withdrawals per month before you have to pay a fee.
- Controls Your Spending
Since money in a savings account will be under Regulation D of the Federal Reserve, it can help you reduce your spending. You’ll less likely spend that money on other things. It will be there whenever you need to get extra funds. If your money is in a checking account, you’ll easily be tempted to spend it on unnecessary purchases.
- Earn Some Interest
Over time, you earn a small percentage of interest that can help your emergency funds grow. The money in your savings account grows because of compound interest. The longer you have money in the account and the more you have, the bigger the interest you can accumulate.
The annual percentage yield (APY) is the rate you get after accounting for compound interest. Some savings accounts, called high-yield savings accounts, can offer an APY of 0.40% to 0.60%. Keep in mind that the interest rate you’ll get depends on your account agreement, where you opened your savings account, and the current state of the economy.
- Secured and Protected
Having a savings account lets you secure your money through insurance. If you got an account with a bank, the Federal Deposit Insurance Corporation (FDIC) would protect you and your money in case your bank fails or closes. The FDIC is an agency that insures deposits up to $250,000. This covers savings accounts, checking accounts, and other types of deposit accounts. That way, some of your money will still be there with you.
If you decide to get a savings account in a credit union, the National Credit Union Administration (NCUA) is the one insuring your money. Like the FDIC, the NCUA insurance also covers deposits for up to $250,000 should the credit union close down or fail.
Don’t overlook the benefits of starting a new savings account. Start investing in your future by opening an account in your bank or credit union today.