Most financial institutions, whether a credit union or bank, will require you to open a savings account before you can utilize their other services, such as checking, investment, or loan products. The low-flare savings account often gets a bad rap and is considered basic or unnecessary.
However, savings accounts play a crucial role in managing your finances effectively and efficiently. Between their earning potential, organizational skills, and accessibility traits, these accounts pack a serious financial punch.
In this article, we’ll break down overlooked perks of savings accounts and features you should seek when selecting the best account for you.
The Perks of a “Basic” Savings Account
Savings accounts might appear basic on the outside because they are so common today. But you shouldn’t count them out in terms of the benefits they can provide in both growing and managing your money.
Here are five perks that make savings accounts powerful financial tools:
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Interest-Earning Accounts
Most checking accounts today offer either no or very low interest rates. This means the money sitting idle in your checking isn’t working for you. Instead of storing excess funds in your checking account, keep most of your liquid funds in your savings account – where it will earn higher yields and grow your balance.
One reason people often keep higher balances in their checking accounts is that they never know how much they’ll need or when they’ll need it. More funds in checking eliminates the potential for NSF (non-sufficient funds) fees.
People forget that money in your savings is easily accessible. You can log into mobile or online banking and instantly transfer funds to your checking account when necessary. That way, your money earns higher yields in your savings until you need it. If you’re worried about NSF fees, most financial institutions allow you to link your savings account as a form of overdraft protection. If there aren’t enough funds available in your checking, it will draw the balance from your savings to complete the transaction. Lastly, you can quickly withdraw cash at any branch or ATM.
Savings accounts allow you to organize your money effortlessly. Whether you’re putting money aside for a specific financial goal, building an emergency fund, or are wanting to keep money liquid for other causes, it’s the perfect place to house your savings.
Some financial institutions allow you to open sub-accounts for specific purposes – taking organization to the next level.
Savings accounts aren’t always a one-size-fits-all. Institutions often offer savings accounts earmarked for special occasions, like vacation or holiday club accounts. For example, with Christmas or Holiday Club accounts, you can deposit funds into your account throughout the year. However, you’re limited in withdrawals, which forces you to save. Then, the money becomes accessible in early November, just in time for holiday shopping.
Alternatively, many people like to open a separate savings account that is not linked to their main account. They can deposit money into this account regularly; however, they aren’t tempted to spend it frivolously or accidentally because it’s harder to access – again, forcing you to save money.
At the credit union, your savings are federally insured up to at least $250,000 by the National Credit Union Administration (NCUA), a US government agency. This extra protection ensures your money is safe.
What to Look for in a Savings Account:
While most savings accounts function similarly, the specific features and benefits will vary by financial institution. When considering where to open your savings account, you should ask the following questions:
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How much does the account cost?
Traditional savings accounts usually do not come with costly service fees. However, you always want to review the costs associated with the account. Is there a monthly service fee? Are there fees regarding paper statements? Do you have to pay for online or mobile banking?
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What are the basic requirements?
Again, most savings accounts do not have hoops to jump through to benefit. However, it’s important to understand any restrictions or requirements on the account. For example, is there a minimum balance requirement you must maintain? What is the initial deposit amount when opening the account?
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Is the account easily accessible?
One of the greatest perks of a savings account is the ability to access your money quickly and easily. Before opening a savings account, see what accessibility options are included, such as online and mobile banking. Do you have to pay to make transfers into your checking account? Is there a separate fee for ATM access on your account?
Takeaway
Savings accounts might appear “basic,” but they pack a powerful punch when managing your finances and growing your balance. Don’t assume all savings accounts are the same – ask questions and find ways you can put this account type to work for you and your money.
You can take your savings a step further by exploring specialty accounts, like holiday club accounts, and opening a separate account to house your emergency fund. Remember, a savings account is there to help you save money.
We’re Here to Help!
Whether you want to open a new savings account for yourself or your child or are interested in specialty accounts, we’re ready to help. Please stop by the Credit Union or call 410-687-5240, and a team member will answer all your questions.