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. Approximately 26% of adults have no savings set aside for emergencies, while another 36% have yet to start putting away money for their retirement.
For many people, it can be easy to put off a discussion about creating a savings account indefinitely. Indeed, 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.
Even when starting small, however, the benefits of learning about and creating a savings fund can be extremely rewarding in the long-term. Here are just a few reasons to start a savings account today, and why doing so can provide individuals and families with an enormous variety of benefits throughout their lives.
Listed below are some significant reasons why you should open 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 almost always able to cover the gaps and help keep you out of debt.
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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. A savings account is able to exchange a few words about discipline and stability to a loan representative.
Extra Security –
The capital that you deposit in a money market or savings account is protected by FDIC insurance. Which 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. And 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 too. 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 get 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 for your savings you 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, 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 ups-and-downs 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 funds 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.
So 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.