A savings account allows you to grow your money over time and can help you plan for short-term goals such as an emergency fund or a rainy day fund. Many people overlook savings accounts because of the relatively low long-term returns that one can expect from a savings account compared to the anticipated returns of other long-term investments. Before you place your cash in a standard bank account, here are some pros and cons to having a savings account.
Benefits of savings account
- Low-Risk Investment
- With long-term investments, you’ll usually lose money over the course of days, weeks or months, but with a savings account, your balance will only go up – that is, unless you withdraw money from it.
- Easily Accessible Account
- Most savings accounts can be accessed at any time through an ATM. This is why a lot of people use a savings account as an emergency fund – you can easily access your funds and immediately have the cash to deal with an urgent problem.
- Earn a (Small) Return
- Some savings accounts can earn up to 2% interest. Although it’s a small return, every little bit helps and the more you put in your savings account, the more interest you will earn.
- Low to No Minimum Balance
- Most banks offer savings accounts with an extremely low minimum balance and in many cases, you can open a savings account with $100 or less.
- Safe Way to Save Money
- The money that you deposit into a savings account is automatically protected by the FDIC up to $250,000. This means that if your bank goes out of business, the money in your account will be safe.
Concerns of a savings account
- Low Return
- Savings accounts differ from other types of investments and the full potential of your money isn’t always realized, especially when you compare it to other investment opportunities.
- Some common limitations include having a minimum dollar amount to activate the account, requiring a minimum balance in the account at all times – or else penalty fees are charged, and limiting the number of transactions in a particular period.
- Easier to Spend
- It is a lot easier to spend your money when it is so easy to access. If this is something you’re worried about, consider choosing a Certificate of Deposit versus a regular savings account. CDs offer a higher interest rate and you lose immediate access to the funds unless you’re willing to pay an early withdrawal penalty.
At Points West Community Bank, we offer a variety of Savings Account options, such as:
- Student Savings Account
- Savings Account
- Corporate Savings Account
- Individual Retirement Accounts
- Health Savings Account
- Certificate of Deposits
Let us help you accomplish your financial goals and open up your savings account today. Get in touch with your local banker to find out more!