Every individual owns single or multiple accounts to invest their money with security and gaining interest in their invested money. The main reason behind opening an account is earning interest, Security, and insurance, along with the pros the savings account also has cons like minimum balance requirements, lower interest rates, federal limits on saving withdrawals. Everyone has a different income source be it minimum or maximum everyone wishes to save it, saving is very important and challenging. Many people have good enough money, but they could not make up to save it properly. This is the reason why people say saving money is yet more challenging than earning it. Savings accounts are the first bank for every individual who wishes to save money for the future and to preserve their earnings with security.
But still many people ignore savings account due to the low interest returns to long-term savings when compared with other sources. If you are confused about whether to open the savings account or not do so, understand the advantages and disadvantages of the savings account, and decide for yourself.
Advantages of Savings Account
Access and Availability
- Savings accounts are easy to open.
- Users can withdraw and deposit money anywhere anytime within the federal limits.
- 24-hour access, online access
- Quick transfers, etc.
- A savings account offers the best protection for your money.
- If the savings account of the bank is a member of Federal Deposit Insurance Protection (FDIC) insures up to 250,000$.
- If the individual uses credit union covered by NCUA insurance, its insurance up to 250,000$.
- Interest accrues on the savings that you have deposited in your savings account, respectively.
- Interest rates depend on the type of the bank, different banks offer different interest rates.
- The national average is 0.09% with higher interest rates of up to 2.05%.
- Though the interest rates are low since 2007, yet the individual will acquire the interest on the savings.
Low Startup requirement-
- Many savings accounts can be started with minimum savings generally with Rs 500/-.
- One can enjoy the benefits of savings account with a modest amount.
Automated bill Payments-
- Almost every financial institution allows you to pay bills directly from the savings account, this will help you from avoiding late fees and missed payments.
No lock-in period-
- There is no lock-in period for savings account, it is easily accessible and available for every use to make it easy for you.
Disadvantages of Savings Account:
The requirement of Minimum Balance-
- Many savings accounts have a minimum balance and monthly maintenance fee requirements.
- If there any fall below the minimum balance, the bank will automatically deduct from the account holder's savings, negating the interest gained.
- The savings account offers very lower interest rates compared to other accounts such as the certificate of deposits, etc.
Federal Withdrawal Limits-
- the Federal limits on withdrawals are 6 times per month, this is due to Regulation D on the savings account.
Rates subject to change-
- Interest rates are not stable, which means the financial institutions are free to set or change rate interest rates anytime.
Initiate Good Savings Habits:
- Track your spending, if you realize you are doing unnecessary spending’s then cutting back on them gives you money back towards your savings account.
- Set up an automatic savings plan. As per your savings, create a budget and pit some portion of your saving into your savings account and preserve it.
Is a Savings Account Worth It?
The benefits of how much you earns (Interest rates) on your savings is not the only the access and liquidity that the savings account offers you and when it comes to the need for emergency the savings account is one of the best choices that helps you. Saving account is worth to have it.