A bank account is a financial account in a banking institution that stores money for a client’s benefit. There are two basic kinds of bank accounts, checking accounts and savings accounts. A checking account is an account that enables the client to get to their money quickly and easily. This can be done by withdrawing money from an ATM (automated teller machine) or EFT (electronic funds transfer), which is done online or through an app.
A checking account is a bank account that is generally used for day-to-day transactions such as paying bills or making purchases. In addition to a checking account, often a client will also open a savings account. Most checking accounts do not earn interest on the account balance as it has money constantly moving through the account. A savings account usually gains interest because it is parked for future use and is less active. Having a savings account should be on the to-do list of every financially responsible adult, and they should be putting some money in their savings account regularly. Here are four reasons you should have a savings account.
Security
While making investments to grow your money is a great choice if you can afford to invest and take risks, opening a savings account is a zero-risk way to earn some interest. While it is low risk thus low reward, parking as much money in the account can pay off over time if you use the funds in your savings account as little as possible.
Having a savings account in a banking institution also provides security as there is insurance through the FDIC that will take care of your money if something should happen to wipe it out. The security of a bank account is significant. There is also additional security in that debits or withdrawals will require a password or PIN, thus keeping the funds secure.
Accessibility
While there are other types of accounts or investments equally as low risk to a savings account, many of those options do not have easy access. If you purchase bonds or invest in certain securities, the withdrawal will either be locked for a certain number of years or carry high penalties for early withdrawal. They may have a higher return rate on interest. Still, if you need to dip into your savings account to cover income or an emergency financial need, a savings account provides easy and immediate access to your funds.
Keeping track of spending
Having a checking or savings account helps you keep track of your money easily due to access. Being able to have easy access can also be helpful to keep track of spending. Each transaction is instantly available online or through an app, which can be especially helpful if multiple people have access and use of the account. This tracking will be helpful when creating a budget.
Gaining Interest
Depending on the context, interest can either be a good word or a bad word when it comes to financial concerns. Interest when it comes to loans or lines of credit can be costly to a person that has to pay it. In the case of interest being charged, the desire is that the interest rate is as low as possible. Interest in a savings account is good because this is money being earned on the money you put into the account. If interest is earned, the desire is that this interest rate will be as high as possible.
When looking into opening bank accounts, the goal is to find a banking institution that meets all your banking needs, but it also needs to be the place where you can gain the most interest on your savings account. Some will have a checking account in a brick and mortar banking institution but will choose to have a savings account in an online bank. Many are going fully online for their savings account because online banks pay higher interest rates than traditional brick and mortar banks. In some cases, an individual will often open a checking account online because many of them offer interest on checking accounts.
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