What is a Savings Account?
So basically, a savings account is a type of bank account that allows an individual to deposit their money, keep it safe and withdraw it whenever required. All this while the money earns interest.
Many banks, financial institutions, credit unions, etc., offer savings accounts and pay interest on deposits. If one wants to see how money multiplies while keeping it safe, then have a savings account with reasonable interest rates.
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How Savings Accounts Work?
If an individual doesn’t have any spending in the immediate future, then it would be unwise and unsafe to keep cash with oneself or elsewhere.
It is wise to have a savings account that most banks and financial institutions offer freely. It means that one can set aside funds for achieving long-term goals.
Also, having a savings account provides a psychological benefit to an individual by keeping a check on the temptation of spending money at hand.
Why is the Savings Account Safe?
Many reasons justify the safety of savings accounts. A savings account holds a person’s money in a safe place, either in a bank or a credit union.
There are always chances for cash kept outside the bank to get stolen or damaged in a fire. Banks and credit unions are covered by insurance. There are significantly fewer chances of individuals losing their money as the government ensures that the savings of the individuals have to be retained and paid in case of any bank closure.
Savings accounts offer easy access to an individual’s cash. One can use the money to spend it or withdraw money, or transfer funds to any other bank account by cheque, electronic fund transfer, or debit cards. Nowadays, one can withdraw cash from their savings account at an ATM or from a bank teller.
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How to Open a Savings Account?
It takes less than an hour and sometimes even a few minutes to open a Savings Bank account. The easiest way to open a Savings Bank account nowadays is to do it online using a mobile device. If an individual wishes to have personal guidance, then they must visit the bank branch. Here are some things that you need to keep in mind while opening a Savings Bank account:
• Compare several banks by reviewing the minimum balance requirement, interest rates, and any other formalities.
• If one is considering non-banking financial institutions or credit unions, then verify their credibility by giving them a call regarding the procedure of opening a bank account and looking for information on the internet.
• Try to choose the bank or a financial institution that takes care of your requirements. Choose a type of account that is easy to operate, help you save money, and deposit your money.
• Try to choose a branch with a convenient location and a mobile app that is sensible and easy enough to use.
• Check out the savings rate, whether they are higher or lower depending upon the size of deposits an individual is going to make.
• Try to gather all the required information regarding the opening of an account, submission of documents, kind of documents required, contact numbers, email IDs, and so on.
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Savings Account Costs and Limitations
Typically, a savings account is free, but there are certain limitations and potential costs that an individual must keep in mind.
• Maintenance of the required minimum balance in the account
• Payment of a monthly fee or annual fee or both if the minimum balance is not maintained
• The banks usually withdraw such fees from the individual’s account and charge overdraft fees in case of zero account balance.
• Upon closing the account, an individual gets the money back.
• Some banks or union credit unions may require an individual to open an account with a specified amount of money.
• Banks may even waive off fees in case if an individual has an account with the institution and is trying to open another savings account
• Every bank may set a monthly withdrawal limit
Multiple Savings Accounts
Some people prefer to have multiple savings accounts for a variety of purposes. Having multiple accounts is beneficial for several reasons. However, an individual should take care that numerous accounts do not take away their interest earnings and that the individual can manage the savings.
The most important benefit of having multiple savings accounts is that it enables a person to keep a check on how the money is being used and track the savings account’s progress.
The major drawback of having multiple savings accounts is that it may become burdensome to maintain the same. However, online banking has made managing various accounts a more straightforward process.
How to Add Funds to Your Account?
There are various ways in which an individual can contribute money to their savings account. Here are some of them:
• By depositing cash either by going to a bank or through ATM
• By depositing checks directly into the savings account by filling up the deposit slip with the savings account number and submitting it to the bank either physically or through an ATM
• By internal transfer of funds within the same bank or through any other bank
• By electronic transfer from one bank to another
• Through direct deposits in the savings account
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How to Access Money from Your Savings Account?
There are many ways in which an individual can use money from their savings account. Some of them are as follows:
• By withdrawing cash either from a bank or from an ATM
• By internal transfer of funds from one bank to another using the bank’s application or website
• By electronic transfer from bank to bank
• By requesting fulfilment of check to use funds from an individual’s savings account
• By using a debit card or a credit card, or online payment gateways
Alternatives to the Basic Savings Account
Usually, people prefer local banks when opening savings account where there is safety and security of their money; however, there are chances that the interest rates may be relatively low. At such times, an individual who wants to make the most of their savings might like to try other alternatives, such as the following:
• Online savings accounts are an excellent option for higher earnings with lower fees. Such accounts have no physical branches and often give out ATM cards for cash withdrawals. Due to fewer overhead costs, online savings accounts are in a position to offer high-yielding interest rates on larger deposits. One can even quickly transfer or deposit funds in their savings accounts using their smartphone that runs the bank’s application.
• Money market accounts are similar to the savings account, which pay interest on deposits and limit transfers. These accounts have the best money market rates in comparison to the savings accounts. They may provide a card or a chequebook, which people can use thrice a month to curb frequent payments and spending.
• Certificates of deposit or CD’s are flexible and offer penalty-free early withdrawals but slightly lower interest rates. These CD’s are earned if an individual has not touched the savings account for at least six months. They come with a specific term or duration and may have a penalty on early closure.
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Key Takeaways
• A savings account is a service offered by banks that enables people to store their money while earning interest in their contributions.
• People make interest because they loan their money to the banks for them to further lend to others.
• For people to use their saved money, they need to move funds from their Savings Bank account to wherever they wish to.
• If one needs to earn higher interest rates, they may consider looking for other alternatives rather than depositing their hard-earned money in a basic savings account.
