Your income may not always grow at the same rate as your expenditure, and to combat inflation, you must invest wisely to make your money grow simultaneously. However, to invest, you first need savings from which you can set aside a lumpsum for your future security. Basically, the sooner you open a savings account, the quicker you’ll have a place to deposit and withdraw funds. Here are some other cool benefits of a savings account.
Your money stays safe in a bank
As cool as it sounds to bury a chest of treasure in your yard, you are better off leaving your hard-earned cash in the bank. For one, banks have giant vaults and guards to keep the funds safe. But mainly because of federal policies and insurance in place that safeguard the cash. The Federal Deposit Insurance Corporation insures up to $250,000 of your savings from any financial recession or depression that affects monetary value. So your money stays safe and is returned to you in any event up to the said limit.
Better returns over checking accounts
Checking accounts don’t accrue any interest. But putting your hard-earned money in savings accounts will earn you nominal interest. So, your money does not sit idle and also generates a second source of payments, however minor it may be, to pay off smaller bills.
Creates an automatic habit
Banks and financial institutions offer auto debit features. So as soon as your paycheck gets credited, banks can transfer an authorized amount directly into your savings account to create a nest egg. This way, you won’t be tempted to spend your money on unnecessary items. Also, you can automate transactions for utility bill payments. The bank will automatically debit your electricity, internet, telephone, and other home utility bills first from the salary credit. What’s left can be then divided between emergency funds, investments, purchases, and wants.
You don’t need a lot of money
Savings accounts can be opened with fewer restrictions in place. You can invest as little as $25 to open an account and maintain the minimum balance that’s required. The rest of your earnings can be easily divided across assets, stocks, and retirement instruments for the future. These accounts can be opened online as well with the least amount of paperwork and formalities. Even verification can be done virtually.
Savings account mistakes to avoid
While saving is a good habit to cultivate, don’t make these mistakes from the get-go.
Saving too much
Keeping an unrealistic goal leaves you little to no money to enjoy the things you like, and there is a high chance you’ll end up regretting this decision. Instead, you need a stable ratio that complements your earnings.
Not keeping an emergency fund
What’s the point of saving when you don’t have cash left around in a real emergency? Never make the mistake of investing all your savings into investments that can only generate returns in the future.
Not comparing terms
Don’t simply choose a bank because they offer a lucrative interest rate. For example, CIT Bank offers a high-interest yield of 4.85%, but the catch is you’ll have to also maintain a minimum despot of $5,000. Instead, choose banks that don’t have lock-in amounts, so you have the flexibility to withdraw your savings to fund a real emergency.
If you are still unsure about maximizing the benefits of opening a savings account, consult with a financial planner once to map out your portfolio.
