- 7 17 Staff
5 Reasons You Should Start a Savings Account
Whether your goals include purchasing a house or setting aside money for emergencies, a savings account is a strategic way to prepare for your future. Starting a savings account will help you put money away, making saving automatic and even earning interest.
Keeping all of your money in a savings account may feel like you don’t have access to it, but the truth is that the money in your savings account is just as readily available as money in checking. With just a few clicks in a mobile banking app, you can transfer money between checking and savings as needed.
Let’s take a look at some of the benefits of starting a savings account.
Reasons You Should Start a Savings Account
It’s never too late to start a savings account — and it’s quite simple. Depending on your financial institution, you may only need your driver’s license and Social Security number to apply for a savings account. Keep reading to find out some of the key benefits and reasons why you should start a savings account.
1. You only need a low minimum balance to start and maintain savings.
Savings accounts are easy to get started. Not only are they simple to apply for, but you also don’t need much cash to open them. Many savings accounts from banks and credit unions offer a low minimum balance and low initial deposit. For example, 7 17 Credit Union’s savings account only requires a $5 initial deposit and a $50 minimum balance to earn dividends.
2. You can earn interest.
Savings accounts differ from other financial products in that you earn, rather than pay, interest. Your interest earnings may be a small amount, but they can add up as you continue saving.
Not all savings accounts are the same, so maximize your savings by choosing an account that enables you to earn interest on your balance. The return from many banks is around 0.01%, with the national average at about 0.06%. 7 17 Credit Union’s dividend rate is 0.08% with a .08% annual percentage yield.
3. It’s a low-risk investment.
With many types of investments, you’ll naturally lose money over the course of days, weeks, months or sometimes years. However, a savings account is a low-risk investment that you won’t lose money from. This guaranteed return is highly beneficial in a fluctuating market during economic downturns. Instead of your savings account losing value, it will hold its value and possibly even increase in value. This is exactly what happened during the 2008 stock market downturn.
4. You can monitor your savings goals.
Saving for a new car, vacation or other purchase? A savings account is a great place to store your money and monitor how much you’ve saved. Additionally, the money is out of sight, out of mind, so you won’t be tempted to spend it like the money in your checking account.
5. It’s federally insured.
Savings accounts at credit unions are federally insured by the National Credit Union Administration (NCUA), and savings accounts at banks are federally insured by the Federal Deposit Insurance Corporation (FDIC). This means that the first $250,000 in your savings account is protected if your bank or credit union fails. The money would either be paid to you directly or moved to a new account at a different bank or credit union.
How Much Should You Keep in a Savings Account?
Tucking away money in case of an emergency is helpful — but how much should you have in a savings account? The ideal amount is approximately 3–6 months’ worth of expenses.
Ultimately, the amount you have in your savings account depends on your financial situation and the amount that makes you feel secure in case of emergency without straining your monthly budget. When you’re determining how much you want in savings, take into account fixed and variable expenses:
- Fixed expenses are bills that don’t change, such as rent or mortgage payments, insurance, internet and child support.
- Variable expenses fluctuate from month to month and include groceries, transportation costs, hobbies and dining out.
Once you determine these numbers, you can then decide if you want to save 3–6 months’ worth of only your fixed expenses and the necessary variable expenses, or if you want some extra padding in your savings for additional variable expenses.
How to Start a Savings Account Designed for Your Budget and Lifestyle
A savings account will make it easier to achieve your goals and set aside money for large purchases or in case of an emergency. 7 17 Credit Union has resources to help you achieve your goals.
Become a member and open a savings account today!