What is a Savings Account

What is a Savings Account?

A savings account is a bank insured place where individuals can build up their wealth free of minimum balance requirements.
Opening a savings account is the first step towards financial independence. Many life scenarios may call on the need for liquid savings
and will you have enough to cover the bills when this happens?

Why Should You Be Saving?

There is a variety of scenarios where money saved can be the difference. Funds can hold you back from ruining your credit, losing your
home and going bankrupt. On the other hand, if you want to improve the quality of your life at some point, such as purchasing a larger, nicer
home or obtaining a higher level of schooling, you will need money to do so.

Savings will come in handy in all of the following scenarios:

  • You need a large down payment on the house of your dreams
  • Your car breaks down and you must buy another
  • You want to pay for your child’s college education
  • You must help an aging parent and pay for health care
  • You want to retire early
  • You want to start a business
  • You need to replace a major home system
  • You lose your job
  • You want to take an exotic vacation

See? All desirable things in life require savings, as well as all disastrous situations that could spell financial problems
if funds aren’t readily available. So why get a savings account?

Savings Accounts are Convenient

Savings accounts are a better option than checking, simply because your debit card is connected to your checking. You make
withdrawals. You spend. When the money is separated, you are less likely to use it unless you take it out for that very purpose.

While with a stock portfolio your cash is tied up and not accessible in a pinch, you can make savings account
withdrawals whenever you need to. The cash is always on hand. Even better, you do not have to maintain a large
minimum balance to open the account in the first place, as you might have to do with some investment funds. Some
savings accounts can be opened for as little as $25 – maybe less.

Whenever you feel the need to check the balance, just log into your online banking account. If the account is linked
to your main checking, you can transfer money whenever you have extra and keep it in your savings for safekeeping. Of course,
the price to pay is savings accounts normally don’t have very high interest rates. But once you gather enough money to use
as a safety net, you can move some of your savings into different, higher yield investments.

Saving Tactics

Just like you pay your bills each month, you should save each month as well. It’s not something that should be pushed to the
bottom of the priority list. If you think that, maybe you simply need a readjustment on your view of saving.

Saving isn’t a chore, it’s paying yourself first for all of your hard work. Set a savings goal and stick to it. Write it down on
your list of bills and make sure it gets done before you start playing with your “extra money.”

You can set up your paycheck to direct deposit a portion into your savings account. Many banks allow this or they give you the option to
set up automatic savings withdrawals on pay day. If you think about it less, you may be less tempted to skip the monthly savings in lieu of
spending the cash on other activities. If its already done for you and you don’t even “see” the savings money as income, you can trick yourself
into saving a hefty percentage of your paycheck every month.

Another way to save, especially if you feel like you have no room in your budget right now, is to cut out one expense and instead transfer the
funds to your savings account. If you pay for a cable subscription you barely use, reduce your monthly bill by over $100 and instead set up an
automatic withdrawal to your savings. If you have $1,200 at the end of the year, you’ll appreciate that much more than all the hours wasted in
front of the television.

Choose a Savings Account

Make sure you select a savings account with no annual or monthly fees. Only work with a bank that offers a reasonable interest rate and
user-friendly online banking options. You want access to your money 24 hours a day, 7 days a week because if you have a crisis, that’s what your
savings are there for. Ask your local bank about savings account options, research savings accounts online or shop around at local credit unions.
Your savings account decision is important and there is no more time to waste between now and the time you make your first deposit.

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