Let’s face it — putting money in the bank is boring. When you get a paycheck, the last thing you want to do is put it away in a savings account or checking account, never to be seen again. However, having a savings account is one of the most important things you can do as an adult.
If you’re banking on spending rather than banking on banking, here are eight reasons you might want to consider opening a savings account.
1. You’ll Accrue Interest
Gaining interest is probably the best reason to open a savings account. Interest (annual percentage yield or APY) is a percentage of the amount of money in your savings account that a financial institution will deposit into your bank account. In a way, banks borrow your money to lend to other customers, so interest is like a “thanks!” for letting them do that.
Savings account interest rates vary, but they typically average around 0.13% of the total funds in the account. You might have higher interest rates depending on how much you save in a high-yield savings account.
2. Your Savings Are Protected
If you keep your money in a box under your bed, you better hope a fire or a flood won’t hit you. When you open a savings account, your money is FDIC-insured. That stands for the Federal Deposit Insurance Corporation.
Essentially, if your bank ever goes bankrupt and can’t exist anymore, the money you had in the account is secure. You’ll either be paid out your sum or open a new account at another bank.
3. It’s Low Risk
You can invest your money in the stock market or gamble it on the lottery. But putting your money in a savings account ensures you won’t lose any funds over time. Thanks to your interest, your emergency fund will gain money from using it.
4. Your Money Is Accessible
Because of online banking advancements, you can easily access your online savings account and make transfers from your phone. You can also access your money at ATMs across the country — even if it’s not your own bank. They might charge fees, but they’re usually small.
5. You Don’t Need Much Money To Start One
The amount of money you need to open up a savings account is very small, with most banks only requiring anywhere from $25 to $100. This is often called the minimum balance, and most banks don’t like when you dip below that point and might charge fees. But as long as you continue to deposit funds into the account over time, you should be fine.
6. You Can Make Savings Automatic
Speaking of deposits, you don’t need to think twice about putting money into your savings accounts. In most cases, you can set up direct deposit so that at least a portion of your paychecks automatically makes it into your savings account.
7. Withdraw Loans and Other Financial Planning Tools
When you open up a savings account at a bank, it becomes easier for you to be approved for personal loans or other financial planning tools from that institution. As long as you maintain minimum balance requirements and pay monthly maintenance fees, banks or credit unions are more likely to approve you for personal finance loans or credit cards — even if you don’t meet some other qualifications.
8. It Can Cut Back on Spending
Many savings accounts have penalties if you withdraw too much cash during a calendar month. While this might seem bad, it is a great way to hold you accountable and prevent you from spending too much on your debit card. Looking at a low account balance is never fun, and having a savings account offers a cushion.
Saving money might not be as exciting as spending it, but it’s necessary to achieve your personal financial goals. But if you want to make saving fun, Yotta is an account that pays out your interest in the form of prizes (up to $10 million every week).
Start saving, and playing, by getting started today.