As kids, we always get jealous of other kids with the latest toys. This jealousy taught us a term called “saving.” We shortened every penny we got and in most cases saved all we got. Hence, we all know that saving is beneficial.
The main difference between our childhood savings and saving account is the storage method. A savings account makes use of the bank for storage which is different from a kid’s piggy bank.in addition to this difference, the savings account is also interest-bearing while the piggy bank is not.
We can coin the definition of what a savings account is by changing terminologies used for piggy banks. The process of keeping money in piggy banks is called depositing in savings accounts. Meanwhile, unlike piggy banks, the money in savings accounts increases substantially. This is called “interest.”
Hence, a savings account is an interest-producing deposit account that is stored at any financial institution or bank. These storage bodies are more reliable and safer than piggy banks. Hence, they are the greatest and common option for storing funds you will need in the short term. In addition to this, the financial institution or banks pay interest.
If you are new to a savings account you will definitely be confused right now. “Why would the body keeping your money save pay you? The cash owner should pay them for keeping their cash secured.” These questions are mostly asked by newbies to savings accounts; especially when told about interest.
Savings accounts and other deposit accounts are the major source of funds to financial institutions. They use these sources of funds to invest especially by lending to top-rated firms. This is the primary reason for the availability of several savings accounts at every credit union and bank. This however does not exclude brokerage firms and investment firms.
Signing up for the opening of a savings account does not have a specific period of enrollment. Hence, you can open one for yourself any working day at your convenience. Meanwhile, you can also open a savings account on a non-working day online.
To open a savings account on a working day, you will need to visit a bank or credit union close to you. You will be required to provide essential means of identification and pieces of information about yourself. These pieces of information and means of identification include names, cell numbers, addresses, and photo identification. Ultimately, you will be required to provide your Social Security Number (SSN). Your SSN is required primarily because of the taxable interest your account earns.
This registration is however not limited to visiting any branch of banks or credit unions. You can also do it from any location through the internet. It is mostly free and you can fund the account anytime after opening your account. Meanwhile, in some cases, you will be required to make an initial deposit. This initial deposit can be done by transferring from a mailed-in or mobile deposit check or depositing to the account in the branch.
Savings accounts are one of the greatest and easiest methods of stashing money for several purposes. Most people use it to save because their piggy banks can not hold the money they intend to save.
Savings accounts are the most secure way to save your money without any fear. You could lose your money to burglaries or theft by keeping them under your mattress or in your piggy bank. Once you lose your cash, they are gone forever. On the contrary, banks will keep your cash secured no matter what occurs. This is because of the Federal Deposit Insurance Corporation (FDIC). The FDIC act as federal protection against bank failures.
You are also given full access to your funds. It is however different from the certificate of account where you would be penalized for withdrawing too soon.
Ultimately, beyond acting as the safest means of keeping your funds, you also earn interest. Hence, your savings account is one of the easiest ways of adding to your funds by merely saving. Although the interest rate may be small, it is better than keeping your funds in your piggy bank or under mattresses. Your piggy bank or under your mattress would not add to your unsafe money.
There are various disadvantages to using a savings account but the less interest rate is the greatest of all. You can keep a large sum of funds in your savings account for a year without a substantial income. Meanwhile, if you keep the same fund in treasury bills, certificate deposit or investment, there would be a substantial increment in your fund.
Ultimately, they are too easily accessible. This could be tempting and you may end up spending what you are planning to save.
A savings account is a good method of saving your funds. Meanwhile, most people rather use investments or certificate deposits. They do this to make more than the little interest a savings account provides. This however does not say savings accounts are bad, but how good it depends on your needs.