Even if you are new to the world of finance, there’s a strong chance that you already know what a savings account is. It is used as a means of storing and safekeeping money; many use a savings account when they have extra money left over from their income. By maintaining a savings account, not only are you keeping your money safe and secure, but you are also preparing yourself for the future by keeping some funds aside for a rainy day. While a savings account comes with its own set of pros and cons, through a general consensus, it is safe to say that having a savings account is ideal for almost everyone. Here is a list of the advantages and disadvantages of having a savings account:
- Keeping your money in a savings account is a good way to ensure that it stays in a safe place and out of harm’s way. A savings account can also help you build an emergency fund or save for the future. Saving your money in a place other than your home is a good way to ensure that your money is less vulnerable to incidents such as robberies, as banks are well-protected institutions.
- Money kept in a savings account accrues interest over time. This means that the money you put in a savings account will eventually grow by itself. If you are starting a savings account with this factor in mind, then it is important to pink a bank that offers competitive interest rates.
- If your bank is insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA), then your deposits are protected by these organizations. The standard insurance amount provided by both bodies is $250,000, which can be extremely helpful if your bank decides to shut shop.
- Another important aspect of having a savings account is easy access to money. In fact, this is what draws most people to banks in the first place. You can easily withdraw money from your savings account, should you feel the need to do so, via ATM cards and bank outlets. You can also use secure online applications to do the same.
- A real disappointment when it comes to savings accounts is that they allow only six withdrawals —without incurring any charge—in a month. After six withdrawals, each withdrawal will be charged a fee.
- Another downside to having easy access to your savings account (some of which have a person’s life savings) is that the temptation to spend the money can be too strong sometimes, and can be counterproductive to the intention behind opening a savings account in the first place.
- Interest rates offered by banks are subject to change from time to time, depending on the financial market and even banks’ internal policies.
- Some banks charge monthly and/or yearly fees for the maintenance of your savings account, debit cards, and other such additional facilities; so it is important to clarify all these factors before opening a savings account.