Savings accounts are the best way to start a savings-big or small. Children can benefit from opening a savings account too, as it will teach them about managing money smartly. Saving a part of what you earn may seem challenging unless you have a goal. Also, by sparing some thought for your future, you can take a wise step towards savings. However, before you get started, check out the pros and cons of savings accounts.
While looking at the pros and cons of savings account, you can easily tell that the accessibility aspect alone overthrows every con that savings accounts may have. For instance, once your savings account is all set up, you can access your money through an ATM or use a debit card that will allow you to pay for your expenses easily. This account may be linked to other investment accounts, and you can access the funds online too. This means that you can accept and send money online.
- Interest on savings
Once your money is in a savings account, the banks will pay you interest on the money. The amount of interest depends on the current rate offered by the bank. While the interest rates may not seem like much, it is better than not earning anything on it (which is the case when you keep the money with you).
- Low starting deposit
Depending on the bank you get in touch with, the amount required for you to start a savings account may be as small as $25. In some cases, the banks may even allow you to begin with $1. Starting low and small may not seem like a great idea. However, it is these small savings that will allow you to save something big for the future.
- Interest rates are not the best
While considering the pros and cons of savings accounts, pay special attention to the interest rate. Savings account interest rates are variable. What this means is that, depending on the liquidity, banks can change the rates. This can affect the amount you earn. If the bank does not pay you a competitive interest rate, inflation can be eaten into your savings. Depending on the inflation rate, your account balance may be worth less than its value at the end of a year.
- Easy to break into your savings
A savings account is great as it helps you to save money for the future. However, this may well turn into a disadvantage. Internet banking, debit cards, and online transfers make it easy for you to break into your hard-earned savings. Fixed deposits offer a little more protection compared to savings that can be easily accessed.
So, now that you know about the pros and cons of savings accounts, compare various banks and interest rates, and sign up for one. You can have multiple accounts too. However, this must be combined with other forms of investments, so your money is secured and keeps growing.