There’s a lot of things you need to do if you are going to get your finances in order. Cut down your debt, control your spending, invest for the future; all of these are things you’ll have to make sure are on your financial to-do list. One of the biggest things on any such to-do list is that you need to save. You’ll see it at the top of nearly all suggestions for how to get your monetary life in order. It’s one of the few things on which every financial advisor can agree: to succeed with money, you need to save money.
Now, where should you save it? Ah, that’s a tougher question. You could simply put your savings in a special place in your house, say, under the mattress, to use the cliché. But this makes it easy to grab and spend, plus you aren’t going to earn any profits on your cash. You can invest it in stocks, but that’s not really ‘saving’; in a bad financial situation, you could lose most of your money at exactly the time you most need it. It turns out that finding an appropriate place for your savings isn’t that easy.
Perhaps the best place to put your money is in the appropriately named ‘savings accounts’. They provide a savings method that avoids the problems we’ve discussed, and provides several advantages of its own. The most prominent are these
3 Big Advantages of Using Savings Accounts
1. They Provide Safety: A major reason to use banks, rather than simply keep all your free money under your mattress, is that the money in the bank is secure, safe from loss even if something happens. Here in the US, the Federal Deposit Insurance Corporation (FDIC) insures all savings accounts, up to $250,000. There are similar organizations in most other countries, such as the Financial Services Compensation Scheme in the United Kingdom (it’s not as sinister as it sounds). These organizations help to assure that you don’t lose any money should there be a major financial disaster (or your bank has to close due to its own financial trouble).
2. They Give You Interest: One of the most basic reasons to have a savings account is that you can gain money while you keep your money safe. While savings accounts are not extremely profitable, you are able to use your savings account to gain interest, a nice bonus while you are keeping your cash safe. Add in the power of compound interest, the fact that your interest will earn interest (and that interest will earn interest, and so on), and you can end up building up your savings substantially without having to do anything; there isn’t any more truly ‘passive’ income in existence.
3. They Allow Easy Withdrawal: It’s easy to forget at times, with all the talk of interest rates and returns, but being able to take you money out at any time is pretty sweet itself. In most cases, to have the opportunity to earn money, you have to give up the ability to withdraw it easily; trying to get the money you have invested in, say, mutual funds back into your pocket takes the better part of a week, at the quickest. (That’s not to say that you shouldn’t invest, but it’s good to have some money in savings.) Money in a savings account is not as easy to get to as if you keep it under your mattress (which does keep you from spending it too freely, a nice benefit as well), but thanks to advances like ATMs and debit cards, you don’t even need to go into the bank itself to get money out, while still getting the other advantages of savings accounts.
With all of these advantages, at least some of your money should likely be in savings accounts. There are lots of options available, especially if you are thinking about opening a bank account online. Before you open any account, though, it’s a good idea to review your family’s needs, to determine just how much you can put aside (and how much you need to put aside) as well as your goals in the future. These factors can help determine what will be the best option for you, and it’s always good to choose an account that meets your needs.