What Are Savings and Why Are They Important?įor the most part, spending can be broken up into several categories: essentials, lifestyle, debt repayment, and savings. Regardless of your financial situation, having a savings account is essential. If you’re interested in investing, they’re an important place to keep liquid cash just in case. If you haven’t ever saved money before, they’re the best place to get started building up money for your future - or for a rainy day. Savings accounts are an important part of your financial wellbeing. Note that if you don’t have any open checking or other savings accounts, you may need to make your first deposit in cash.īefore committing to any option, be sure to read our guide to everything you need to know about opening a savings account. In most cases, you’ll need personal information, like your full name, date of birth, Social Security Number, email, phone number, and address. If you’re not sure, you can usually go in-person (or call) to speak with a representative, who can walk you through the basics of opening an account. Some might even give you a reward for depositing a certain amount when you make the account.īe sure to research large banks, local credit unions, and newer online options to see what works for you. Others might offer higher interest rates. For instance, some might have a minimum balance you need to deposit to keep the account open. You can even do one right now - all you need is an internet connection, some personal information, and some cash to deposit.įirst, however, you should be sure to do a bit of research. Luckily, opening a savings account is pretty simple. Many people keep savings accounts in order to maintain emergency savings for a rainy day, or as a place to keep money for a future purchase, like a down payment on a car or home. They’re meant to slowly grow your money in a low-risk environment where you can still access it if you need to. While checking allows you quick access to cash, and various investment accounts let you grow your money (with some risk of losing some), savings accounts are a steady and stable option. Savings accounts differ from other types of accounts, like a checking account or investment account. Savings account definitionĪ savings account is a bank account that allows you to store money securely while earning a small interest rate. You deposit money in the account, and the bank pays you a small interest rate (usually 1% or less) to leave your money there. Whether that’s a large bank like Chase or Wells Fargo, your local credit union, or a trendy online option like Ally or Chime, they work roughly in the same way. Savings accounts are a type of bank account. Let’s start with a savings account definition. How much should I keep in my savings account?.What are the different types of savings accounts?.Understanding your options helps you spend and plan with confidence. Everyone has a different relationship with their savings goals. Sure, saving may seem out of reach when you first begin, but building this practice can improve your overall financial wellness. Examples include traditional savings, CDs, or money market accounts. Savings - the noun - are the tools you use to accumulate this money. You might use these funds to build an emergency fund, make larger purchases, or even invest further. Saving - the verb - is the act of setting aside income for future use. What exactly is saving? A savings account and the act of saving are not quite the same. As with all things, it’s always best to start small. Managing your savings is a skill developed over time.
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