Having a savings account is essential for one’s financial well-being. It helps individuals prepare for emergencies and reach long-term goals. Regularly putting money into an investment account is important to creating financial security. Many people make the mistake of waiting until a certain age or life stage to begin saving, but establishing a savings account should happen early.
Many consumers have a checking account and usually have a debit card too, but there are still many people who do not have a savings account set up. For one reason or another, the majority of consumers who open a checking account usually do not open a savings account at the same time, but they really should. The number of American households that have no emergency cash in the bank to fall back on is astounding. According to Bankrate’s latest Financial Security Index, more than half (51 percent) of people have less than three months’ worth of savings in an emergency fund.
For many people, it can be easy to put off a discussion about creating a savings account . The subject can sometimes feel confusing or even uncomfortable to think about. With the high costs of living many people experience, it can be difficult at times to imagine creating a household budget that leaves room for saving. However, the benefits of learning about and creating a savings fund can be extremely rewarding in the long term.
Here Are 5 Reasons Why It’s Important:
1. You May Not Need A Lot Of Money To Open An Investment Account –
An investment account is a great way to save money for future needs and goals. It only takes a small amount of money to open an account, often as little as $25, and most financial institutions have no fees or minimum balance requirements. The money you deposit into an investment account earns interest, which will help grow your savings over time.
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Having an investment account is a great way to have an emergency fund. An investment account can help you reach your long-term financial goals and provide peace of mind for a rainy day.
2. A Savings Account Can Make Saving Automatic –
Having an investment account can make saving money easier and more automatic. Savings accounts provide a safe place to store money and build up savings. When connected to a checking account, most savings accounts allow funds to be transferred directly from a checking account to a savings account, making it easier to move money into a place where it can be saved.
This can help form good savings habits, as the money is automatically removed from a checking account and deposited in an investment account. Many banks also offer automatic transfers from checking to savings accounts, so customers can set up a schedule for saving money. An investment account can also offer better returns on money than a checking account, so it can also help to build up savings more quickly.
3. Your Money Is Accessible –
Having An investment account helps to ensure financial security. It offers the convenience of easy access to your money when needed while earning potential interest over time. With an investment account, your money is protected and FDIC-insured, so you can be sure it is safe.
Savings accounts can also be used to save for short-term and long-term financial goals. An investment account also provides security in an emergency, offering the extra cushion you may need for unemployment, medical costs, or other unexpected expenses. An investment account can help build good financial habits by teaching the importance of budgeting and saving.
4. You Can Earn Interest On Your Savings –
A savings account is a great way to keep your money safe and secure. An investment account allows you to save money in an account that generates interest over time, which can help you accumulate wealth. With an investment account, you’re also more likely to save money, as it’s more difficult to access cash. This is a great bonus if you’re trying to achieve specific financial goals.
An additional benefit is that some banks offer additional protections and insurance on the funds in your savings account, so you can be sure that your money is safe and sound. Finally, having an investment account can help you build your credit; as with most banks, regular deposits and withdrawals are recorded and reported to credit bureaus. All these features combined can help you get the most out of your money and help you to achieve your financial goals.
5. Your Savings Are Protected –
An investment account provides numerous benefits, such as earning interest on deposited funds, protecting against the risk of inflation, granting access to capital, and providing security. Money in an investment is backed by the federal government and is insured for up to $250,000 in the case of a bank failure. This can provide peace of mind and security for those trying to build their savings.
Also, having an investment account may help you manage your finances and reach your goals. Banks often offer overdraft and consumer credit counseling services and access to other products such as loans and investments. This can help you plan for your future, build your credit score, and make informed financial decisions.
Here Are A Few More Reasons Why You Should Have A Savings Account:
Unforeseen Spending –
You can never recognize beforehand when an urgent situation will take place. A broken major appliance or an expensive automobile repair can put a huge dent in your finances. Although you have probably arranged your insurance coverage on all fronts, you almost certainly will still encounter those nasty deductibles. A vehicle accident, a serious illness, or a fire at your residence can necessitate considerable out-of-pocket costs. Life can damage the budgets of even the most financially disciplined people; nevertheless, a savings account is usually able to cover the gaps and help keep you out of debt.
Asset Protection –
The returns linked with savings accounts traditionally have been smaller than those of other types of investments. For instance, real estate, bonds, and stocks offer a much higher rate of return than a savings account ever could. However, tying up all of your capital in illiquid or speculative investments for the likelihood of a superior return means that you might be enforced to sell at an unfortunate time due to an unexpected expense or emergency. Having a savings account open is a good way to protect your investment collection from loss via forced selling.
Leveraging Chances –
Managing a savings account enables you to take advantage of possible profitable monetary opportunities. If you happen to stagger upon a rare but wonderful business opportunity, you might not be able to invest in that opportunity if you do not have sufficient money to put forward. Furthermore, if you attempt to get credit with your bank for whatever purpose, a vigorous savings account can improve your prospects of achievement.
Extra Security –
The capital that you deposit in a money market or savings account is protected by FDIC insurance. This means that even if your bank were to suddenly go bankrupt and close, the government will substitute your funds up to a certain amount. Money can be lost, destroyed, or stolen, but if you deposit that same money into a bank in a savings account, more or less it is secured. You are also able to earn some interest while depositing your money in an interest-bearing savings account.
Self-Determination From Credit –
A savings account may enable you to attain your financial targets without employing the use of credit or a loan. When you purchase something on credit, you are paying for the freedom of being able to get the item right away, although you don’t actually have the money on hand to purchase it. If you amass a decent amount of money in a savings account, it permits you to purchase some things that you desire without having to rely on a loan or use credit and possibly lower your credit score by doing so.
Life is full of unexpected twists and turns. In addition, when the unexpected happens, such as accidents, sickness or a furnace dying, you need money to pay for the unplanned bills. Having a savings account makes the money easily available to you. You don’t want to have to rely on credit every time something breaks in your house or if you get a flat tire. Having a savings account for these kinds of unexpected emergencies is so invaluable and important.
There When You Need It –
If you require easy access to your money, a savings account can offer you that. Keeping it at home is not a good idea because it may get lost or stolen. On the other hand, if you put all your money into investments like stocks and bonds, you won’t have any when you need it. Money saved in a savings account is easily accessible. You can withdraw it anytime you need to. Just make sure you understand the terms of your savings account. Sometimes there are a maximum number of withdrawals from your savings account every month without a fee. If you go over that number of withdrawals, you could be hit with a penalty fee.
Make Your Money Work For You –
If you can open a high-interest, savings account, that’s the way to go. Your money will essentially be making you more money just by being in there. The more you invest, the more interest your savings are likely to get. You can use this free tool to compare the highest savings interest rates across thousands of banks and credit unions: https://www.consumersadvocate.org/savings-accounts
Major Life Goals –
How many times have you been told that you better save money for retirement? That’s because it’s important to start ASAP. Retirement, however, shouldn’t be the only life goal you save toward. In fact, there are several milestones in life that will require you to crack open your wallet or write a hefty check. Consider the following life-changing goals: college, marriage, buying a house, having children, etc. If you have a bucket list that includes things like traveling, having new experiences, etc. then you’ll need money to do those things as well. It’s important to save for these life-changing and wonderful experiences.
Emergency Funding –
One of the most important reasons to create a savings fund is to have ready access to money that can be used in emergencies. For example, if company lay-offs occur where a person works, a savings fund can adequately provide them with resources such as mortgage payments for an extended period of time. If a natural disaster occurs, a savings fund can provide individuals with much-needed cash for temporary housing and other expenses. A savings fund is a great shield against the difficulties that many people experience in life.
A savings fund can also be an important resource for retirement. In fact, a good savings fund can enable individuals to retire early if they choose to: Because a savings fund will earn interest when kept with banks, a fund that is large enough can provide retirees with the ability to live well without dipping too much into their principal balance. That can significantly boost the quality of life that a person can have when retired.
With a good savings fund, individuals and couples can also increase their access to the housing that they want. A good savings fund can provide much-needed cash for securing an apartment, for example, and it can also provide a great down payment on a home. In most cases, banks look for a down payment of around 20% on a house, so a healthy savings fund can often enable buyers to purchase a bigger home and have more room for bargaining when making an offer to realtors.
Savings funds can also help families in the long term by providing funds for college educations and private schools. Tuition rates at most colleges and private schools are very high at the moment, but a great savings fund can make the process of paying for a child’s schooling much easier and far less stressful. If further education would lead to a better job, individuals can also use a savings fund to return to school and seek out new qualifications.
For these reasons, creating a great savings fund can be one of the most rewarding things that a person can do. It may be difficult to create a household budget that leaves room for saving at first, but with time, the process of saving each month will become easier, and the rewards of saving will be more than worth the effort.
Once you have opened a savings account, one of the best ways to save some money is to automate your savings, so you don’t have to remember to set aside money every time you get paid. There are many innovative and easy-to-use automated saving tools that can help you save automatically, and can make saving money almost as easy as spending it.
Moreover, there is a general agreement throughout the financial expert community that having a savings account will help to give you peace of mind since it enables a person to plan for whatever he/she desires to accomplish, purchase, or repair.
Therefore, the next time you set up a checking account or the next time you walk into your bank, ask them about their savings account options. It really is one of the best financial decisions that you can make for yourself and for your family.