A savings account is a type of bank account used by individuals and businesses to save money for future use. A savings account is also known as an interest-bearing deposit or IBD. Interest-bearing deposits are very popular accounts because they pay interest to the holder on the amount deposited. The interest rate paid depends on the number of saved funds but usually ranges between 0% and 5%.
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It Keeps your Money Safe
A savings account is a safe place to keep your money, you earn interest on it, and you can withdraw it at any time.
This is important because if you don’t have savings, if something bad happens to you (like losing your job or getting sick), you’ll be stuck with a way of paying for your expenses once they’re all paid off. If this happens, all the hard work that went into earning those other sources of income could go down the drain!
It Helps you Build an Emergency Fund
Your savings account is a great tool for building an emergency fund, which is a fund you keep separate from your regular checking account and use for emergencies. Ideally, an emergency fund should have at least three months’ worth of expenses saved up (so if you spend $1,000 per month on average, it would be good to have $3,000). In addition, an emergency fund can be used for things like car repairs or medical bills when you don’t have enough money in your checking account.
It Makes you Money
A savings account is a great way to save and earn interest on your money. So, you should open a checking account online instantly whenever you have time. SoFi professionals state, “Your money is going to earn interest at a rate that is 50x the national average.” There are two ways you can earn interest on a savings account:
- By having an eligible checking account with them and making at least one monthly direct deposit; or
- By opening a regular share draft or Money Market Savings account and depositing at least $2,500 in new funds into the account at each statement cycle.
It Helps you Make long-term Purchases
A savings account is a great way to save for the future. You can use it to save for a home, car, or college tuition. It can also be used to save for retirement and your children’s education.
It Makes it Easy to Budget
Setting up a savings account is a great way to get into the habit of saving. Once you’ve done that, you can set up an automatic transfer from your checking account to your savings account each month. This will help you stick with your budget and put a little money away every month, which is important if you want to reach financial independence. If any money is left in the checking account at the end of the month, it will be sent back to pay for bills or other expenses.
Using a savings account can benefit you in many ways, but the most important one is that it will help you save more money. As you make deposits into your savings account and increase your balance over time, you will see that it is possible to reach any goal that you set for yourself when starting out with just a little bit of hard work.