Do I Need a Savings Account?
Savings accounts can help you build up funds to cover any future financial plans or unplanned expenses. If you don’t have a savings account, you’re not alone! “Thirty-five percent of all adults in the U.S. have only several hundred dollars in their savings account and 34 percent have zero savings.” [1] It is never too late to start saving. Check out these ways a savings account can help you.
A savings account is a bank account that lets you store your money securely while typically earning interest. This means the bank pays you to keep your funds deposited, with annual yields on some accounts. [2]
Why do I need a savings account?
It’s a good idea to have an emergency fund, especially during uncertain times. There is always a chance an unexpected expense may arise, no matter how well you budget your money. A job loss or a sudden medical emergency could affect your budget and how you're planning to pay your bills next month.
The best way to protect yourself from these situations is to have an emergency fund. There is no risk to putting your money in a savings account, and the interest you earn by keeping money there will add up over time. Once you earn interest on the money you’re saving, that interest can earn interest of its own, also called compounding interest.
Reasons to start a savings account:
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Earn a higher interest rate
Instead of leaving your disposable income in a checking account, you can earn interest on your money if it’s in a savings account.
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Starting an account takes little cash
You don’t have to have a large amount of money to open a savings account. Some banks require a deposit, while others may not.
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Helps to limit spending
Money in a savings account is more difficult to withdraw than a checking account, as there are often limits on how many times you can withdraw funds. This can help you to control spending - since your money will stay in your savings and accrue interest.
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Increase your emergency fund
An emergency fund is one of the most important uses of a high-yield savings account. Experts suggest saving at least three months’ worth of expenses in an emergency fund, and more than three months saved if you are self-employed.
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Steadily save for a major purchase
Save up for big purchases like a car, home, or wedding with your savings account. Saving a portion of your income on a regular basis can help build enough funds for big life events.
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Save more, safe often
If you’re able to save more, you should do it. You definitely won’t regret saving early and saving as much as possible. Plus, the earlier you save, the more compound interest you’ll earn.
Interested in opening a savings account? Visit your local Jefferson Bank branch or contact us to get started!
Sources:
[1]. Here’s How Many Americans Have Nothing at all Saved for Retirement, CNBC
[2]. What Is a Savings Account, NerdWallet
