Opening a savings account is a great way to create a sense of financial responsibility and agency over your money. There are countless reasons of opening a savings account to ensure financial well-being and healthy spending habits. To avoid going into too much detail, here are 5 benefits of opening a savings account.
1. Safety net
Opening a savings account is imperative for giving yourself a financial safety net. In life, there are plenty of surprises. Unfortunately, those surprises can be hard on the wallet and your bi-weekly salary just may not be able to cut it to take care of a sudden expense. This is where a savings account comes in very handy. By putting a little bit of your income into a savings account over time, you can ensure that you some money available to cover a surprise expense that would simply be too expensive to take out of your paycheck. This also gives you peace of mind. Instead of worrying when life is going to bite you in the butt and how you would recover, you can rest easy knowing that you always have some money that can be devoted to any surprise disasters. There may even be a week that you spend your entire paycheck early due to poor budgeting, it happens to all of us. Being able to “loan” money out of your own savings account will alleviate the need to starve yourself for a week and you can replenish your savings later. Overall, having a savings account as a safety net for life’s many surprises will take the pressure off of you and ensure that you are ready for any financial challenges.
2. Better responsibility
Having a savings account promotes better responsibility for your spending habits. If you only provide for yourself, it may be tempting to take your entire paycheck and go crazy the day after payday. This is not the wisest decision because you have to be sure that your paycheck will be able to provide for you until the next payday. Depending on how unwise you are, that money can disappear far quicker than the next payday and leave you desperate for some cash. Opening a savings account to contribute a portion of your every paycheck ensures that not only you are saving some money for a rainy day, but also that you are budgeting whatever is leftover. This allows you to stretch your dollar and forces you to be responsible. And as already stated, no one is perfect, and there will be weeks when you go over your budget. Constantly contributing to your savings ensures you have resources to take care of the overage. Use a savings account to instill responsibility, but don’t afraid to take some pressure off of yourself when you occasionally mess up.
3. Separates expendable income
Using a savings account protects your expendable income from becoming 100 percent of your paycheck. As we’ve already established that it’s important to keep some money for the occasional surprise, keeping your expendable, or spendable, income separate from money you intend to save will ensure that this money actually is preserved. That is the beauty of a savings account. Your money that you wish to keep around is completely separate from your main/checking account, so you can’t spend it even by accident. You may already be great at budgeting and saving money, but if you keep all of your money in one checking account, plenty of mistakes can happen. Even if mistakes are out of the question, keeping all of your money, even savings, in one place puts you at high risk of fraud and theft. If you lose your debit card and someone decided to withdraw a large portion of the balance, it will be a chore to get that money back. Keeping a large portion of your money in a savings account secures the money from those kinds of risks. Overall, having a savings account provides better security of a large sum of money, and prevents it from being spent, whether by accident or theft.
Savings account benefits are another huge reason to consider opening a savings account. Especially if you are a student, you can find plenty of banks that are offering quite stellar benefits for you to open a savings account. These benefits usually mean an interest rate that will be applied to your account every month. In this case, you want to find the highest interest rate possible, so that the bank is paying your account a good amount of money. Now, don’t get your hopes up, you’re not going to find an extraordinarily high interest rate, and this won’t mean much money is being added to your account unless you have several hundreds of thousands of dollars in the account. This is still free money though, and worth researching when looking to open a savings account. Also, as a student, you can find savings accounts that don’t charge maintenance fees. Finally, you can use services that will invest small portions of your money for you to further expand your amount of money. There are plenty of ways to stretch your dollar through a savings account. If you are strategic, you can gain a good amount of money by opening a savings account and better your financial well-being.
5. Easily accessible
Even if your money is going into a savings account, that money is still easily accessible. You are not throwing your money into a black hole with limited availability. With today’s modern banking technology, you can easily transfer money from your savings to your checking account and vice versa. There is often limits on how many times you can transfer per month, but I find that this is a good deterrent from chipping into your savings when you don’t need to. If your employer allows direct deposits, you can also set it up to where it automatically deposits a percentage of your paycheck into checking and savings. This means you can be contributing to your savings without even thinking about it. This is a great way to ensure that you are being financially responsible with your paycheck.