www.thecashloans.com
The Good And The Bad Of Savings Accounts
Savings accounts have long been the way for many consumers to stash away a few dollars for later access. Since they are liquid funds, you can access your savings account anytime the bank is open with no restrictions for withdrawals. Unlike a certificate of deposit account which requires that your money be tied up for a certain length of time, a savings account is readily accessible at a moment's notice. On the other hand a savings account doesn't always keep up with inflation, making this type of investment a money loser for the long run. Read on and we'll discuss some pros and cons of using a savings account.
Pros:
Your money is liquid and readily available to you whenever the bank is open. With online banks proliferating, you can access your funds off hours too. However, with online banks you typically have to wait a couple of business days before the funds are credited to another account where you can withdraw your funds.
In many cases all you need is a low minimum amount, typically $100 to fund your savings account as opposed to much larger funds needed for a certificate of deposit account. Some banks even waive the minimums especially for juvenile accounts to help teach children how to save.
Cons:
Low interest rates mean that you could be losing plenty on your investment over the course of a year or longer. Rates of 1% on savings are still common although several commercial banks are now paying over 3% annually, just below the inflation rate. To stay ahead of inflation, consider an online bank as many of them are now paying around 4.5% for liquid funds, just above the inflation rate.
You can also make the mistake of having too much money in a savings account when those monies would be best invested in a longer term and higher paying investment vehicle.
In times past, banks would sweeten new certificates of deposits with prizes and some institutions extended similar offers to holders of savings accounts. These gimmicks ultimately affected rates and have, mercifully, been almost universally discontinued. Still, a $20 reward to open up a new savings account that pays a higher level of interest is worth your consideration.
So, short of stashing your funds in a mattress, consider the savings account that offers to you the best returns on the money in order to stay ahead of inflation, the chief nemesis of your personal wealth.
