Savings accounts let you keep your money safe and secure and also offer interest against your deposits. Even though the interest rate is relatively low, people choose savings accounts for their exceptional benefits. These accounts help individuals create emergency funds to support themselves in times of need and save for short-term goals like buying furniture or going on an extended vacation. Here, we detail the benefits of savings accounts and their types.
Benefits of keeping a savings account
When you open any type of savings account at any bank or financial firm, you will have limited but specific benefits that other accounts may not offer. These exceptional benefits are as follows:
- Efficient account setup
Opening a savings account is easier than ever, thanks to the internet. You can open one sitting at home by visiting the bank’s website. While you can choose any bank, you will enjoy better benefits if you open a savings account in the same bank where you have a primary checking account. For instance, you can transfer money between these accounts instantly, and deposits and withdrawals will be faster. - FDIC insurance
Most savings accounts come with FDIC (Federal Deposit Insurance Corporation) insurance. It means you will receive up to $250,000 if the bank collapses. Regardless of whether the bank files for bankruptcy, your money would be safe. - Low risk
You will hardly hear people say they have lost money by investing in savings accounts. In many other investments, you may lose money in days, weeks, or months, but not in savings accounts. The money kept here will only grow because it is safe from market volatility. - Full balance withdrawal at any time
Unlike many other accounts that place hefty charges against full withdrawals, savings accounts impose no such charge. You only need a debit card and an ATM, and you can withdraw money anytime. - Steady return on deposits
Savings accounts may not earn a massive interest to make you rich instantly. However, you can rest assured that your money will grow steadily over the years if you maintain a healthy balance. While the rate can vary from bank to bank, large ones offer an interest rate of 0.01%, and the national average is 0.06%. When shortlisting banks, carry out an interest rate comparison to find the best one.
Types of savings accounts to choose from
You can choose from different types of savings accounts according to your needs. Some of the best options include:
- Regular savings account
This account is ideal for those who wish to save money and care less about getting the best interest rate. Although it accumulates interest, it is much lower than other savings products. Since regular savings accounts are increasingly popular, you can find them at any traditional bank or credit union. - High-yield savings account
High-yield accounts are best for those who want to earn a competitive interest rate on their savings. Generally offered by online banks, neobanks, and online credit unions, these accounts offer a high APY (annual percentage yield) than regular accounts. However, you may be obliged to pay a specific savings account maintenance cost. - CD account
CD or Certificate of Deposit is a time-bound deposit. You leave the money in the account for a lock-in period, during which it attracts handsome interest. You can withdraw the entire amount or create a new CD when it matures. This type of savings account differs from others because of the time factor. However, people still prefer it as it offers a decent interest in a short period. - Cash management account
This is the best option for those who want an account from which they can regularly withdraw money for daily expenses like groceries and bill payments. Cash management accounts are not meant to save money but to make routine transactions easier. However, your deposited money still qualifies for interest. Such an account can offer you the benefits of both savings and checking accounts. - Specialty savings account
These accounts may help you meet specific financial goals, such as buying a new car or saving for education. There are different types of specialty savings accounts, such as kids’ savings accounts, students’ savings accounts, and custodial savings accounts. Open one if you want to save money for a specific purpose in the future.
These are some of the top savings accounts. Inquire about them at any financial institution or bank and learn about the interest rates, fees, and costs. Nowadays, a savings account is necessary because you never know when you need money. However, do not hurry in this matter. Instead, take things slowly by researching the banks or credit unions that offer this account service. You can even visit them physically and speak to their customer representatives to clarify your doubts.