A savings account is one of the common types of bank account and is usually second to a checking account. This is where you can safely save your money and let it earn a small interest every month. Usually, this account will need a small maintaining balance, like $20, though some banks don’t require any minimum balance at all.
Is It Better To Save Money In The Bank
Keeping your money in a savings account is safer compared to just keeping at home. Your home can get robbed or worse, it can burn down with your cash still in there. But with banks, your money will be safe and will definitely be fireproof. Also, your money is insured by the Federal Deposit Insurance Corporation for up to $100,000. This simply means that if the bank gets in trouble or closes down, you will still be able to get your money.
The Federal Deposit Insurance Corporation is an independent agency that was established in 1933. The reason behind this was because, during the ‘20s and early ‘30s, a lot of banks failed. Since FDIC began, no person lost money in all the banks.
How Does Your Savings Earn Interests
As mentioned above, your money will earn interest once you put it in the bank. Some banks will require a certain balance for your funds to gain interest, while some banks don’t. Usually, the interest is compounded every day and is paid in your account every month.
Kinds Of Savings Accounts
Now, speaking of interests, the amount will usually depend on the kind of financial institution that you choose and the kind of account. Credit unions and banks are different financial institutions. Credit unions are cooperative organizations that are non-profit, while banks are commercial businesses. These Credit unions are organized by groups of people and have loans that are not that expensive. They might not give high interest rates compared to banks when it comes to loans, though.
But this will not always be the case since recently, interest rates at some Credit unions are higher than other banks. Also, they pay interest on certain accounts, wherein some banks won’t pay on, such as checking accounts. If you prefer opening an account in Credit unions, then you need to become a member of the organization.
Money Market Accounts
One type of savings account is money market accounts. This is perfect for people who are looking for higher interest. But this also means that you need to put in more money to your account, for it to be able to earn more interest. This type of account also has limited withdrawal per month. Besides withdrawals, you can also write a maximum of three checks each month on a money market account.
Basic Savings Accounts
The basic savings account or also known as the passbook savings, usually has no minimum balance. If there is even one, then they will only require a low amount for that. When it comes to this type of savings account, the interest rate may vary, and it is usually low. This means that your money may not earn that much if that is what you’re after.
During the year 2004, the interest rates for the basic savings account is usually less than one percent. On the other hand, this account will let you withdraw your money anytime you please.
Involved Costs In A Savings Account
There are some banks that charge bank fees when opening and maintaining a savings account. The fee is usually low and is just around one dollar for every month. There are also some instances that the fee will depend on your balance or may also be higher. That’s why it is important to compare what each bank is offering. Here are some things that you should check with the bank that you are eyeing:
1.Know how much the interest rate will be paid on your balance.
2.Know the required minimum balance. Some banks will charge you a fee if you don’t meet the minimum balance.
3.Know the service and fee charges on that specific account.
What Will Happened After Opening A Savings Account
Once you open your own savings account, you will get a checkbook register, which is a small book where you can write the total balance that you have. Usually, the initial amount that you will deposit is the one that you will write on that checkbook. Just make sure to write down all of your deposits and withdrawals in the future, as this will help you keep track of your money.
Every month, your bank will send you a bank statement, where you can see all of your transactions and the charged fees to your account. You will also see how much interest you earned. Remember to write everything out and compare your checkbook and the bank statement to ensure that everything matches up. Now, if it didn’t match, you need to check and find what the mistake is so you can correct it.
These are all the information that you need to know when it comes to savings accounts. Start opening an account so you can save money on it and watch it grow.
Based on Materials from How Stuff Works – Money
Photo Sources: Investmentzen, Cheapsheet, Pixabay, HDFC