If you have recently started working or looking to save more with your present job, you need an account to park your funds. Without such a dedicated account, the chances of you spending the money will be quite high. Not to mention that your funds won’t be organized.

A savings account is an excellent way to save and grow your money while still having access to it when you need it. Here are a few benefits of savings accounts that you may not know about.

Savings Accounts Offer Protection from Identity Theft

When you open a savings account, the bank will require some personal information from you. This includes your name, address, Social Security number, and date of birth. The bank will then run a credit check. This helps to ensure that the person opening the account is who they say they are.

Furthermore, the bank will also verify your identity by asking for a government-issued ID, such as a driver’s license or passport. This helps to protect you from identity theft.

Savings Accounts Give You a Place to Save for Goals

You can set aside a specific amount every month in your savings account for a goal. For example, you may want to save for a house or a new car down payment. Or, you may want to save for retirement or your child’s education. Whatever your goal may be, a savings account can help you reach it. 

Consider following a few ground rules to put money in your savings account, such as:

  • Automatically transferring a fixed amount from your checking account to your savings account each month
  • Not making any withdrawals from your savings account until you reach your goal
  • Reviewing your savings goals regularly to make sure you are on track.

Savings Accounts Earn Interest

Most savings accounts, including those from credit unions, earn interest on the funds you deposit. The interest is usually calculated daily and paid monthly. The interest rate will depend on the bank and the type of account you have.

For example, some banks offer higher interest rates for accounts with a higher balance. While the interest earned on a savings account may not be much, it is still more than what you would earn if your money were sitting in a checking account.

Savings Accounts Offer Liquidity

A savings account is a liquid asset, which means you can withdraw your money at any time. However, there may be some restrictions, such as limiting the number of withdrawals you can make each month. Nevertheless, a savings account gives you easy access to your money when you need it.

Savings Accounts Can Help You Avoid Overdraft Fees

You can avoid overdraft fees if you have a savings account linked to your checking account. An overdraft happens when you don’t have enough funds in your checking account to process a transaction.

For example, if you write a check for $100 but only have $50 in your checking account, the check will bounce. This will result in an overdraft fee, typically around $35.

However, suppose you have a savings account linked to your checking account. In that case, the bank can transfer funds from your savings account to cover the difference. This way, you won’t be charged an overdraft fee.

Savings Accounts Are Federally Insured

All savings accounts are federally insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. This means that your money is safe if the bank fails.

Final Word

A savings account is a great way to save and grow your money. It offers protection from identity theft, earns interest, and is federally insured. Plus, it can help you avoid overdraft fees and reach your financial goals. If you don’t have a savings account, consider opening one today.