Why Should I Put Money Into a Savings Account?
With the growth in the number of financial instruments and investments alternatives, some people never consider putting some of their money in a savings account. A savings account is a consumer bank account that earns a small amount of interest monthly. Many savings accounts require a minimum balance or charge you a monthly fee. If you haven't considered setting up a savings account, examine the benefits and decide if it makes sense for you.
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Liquidity
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When immediate cash is needed, you can quickly obtain it by going to the teller window or ATM and withdraw money from your savings account. With less liquid investments, such as bonds, you have to wait for the securities to be sold and the money to be mailed or electronically transferred to you. Regardless of your financial investment strategy, you should keep some liquid assets in your portfolio.
Safety
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Keeping money in a savings account prevents cash from being destroyed should your house have a fire or other type of damage.If you are approaching retirement with limited earning capacity, a portion of your investment should be kept in a safe, stable location. Savings accounts are safe because the Federal Deposit Insurance Corp. covers deposits an individual has in each insured bank account up to $250,000. What this means is that if a bank goes out of business or defaults on paying you your money, the federal government will provide the funds to you.
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Interest and Savings Mindset
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The bank where you set up a savings account will pay you interest on the money you deposit. This is a partial offset against inflation.
Having a savings account also encourages the account holder to put money away for savings. One savings approach is to automatically deposit a percent of your paycheck into your savings account.
And a savings account allows you to segregate funds from checking. Being able to see the money in a separate savings account provides a tangible and positive reminder of your savings activity. A savings account can also be used to save money for a particular purpose, such as a vacation.
Education
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Setting up a savings account for a young child and having the child contribute part of his allowance to it provides a good way to teach him about the importance of savings. Depositing money there also provides an early start for saving for college.
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