Experts agree that anyone interested in saving for the future should have a savings account. Savings accounts allow people to build savings over time, while providing a solid foundation for future financial stability.
One of the best uses for a savings account is its use as an emergency fund for unexpected expenses, such as a car purchase or repair, home maintenance expenses and medical deductibles or bills. Using the cash in an emergency fund, rather than a credit card, avoids having to pay interest in the event that the balance is not paid off immediately. Financial experts recommend that a savings account hold a balance equal to three to six months of living expenses to cover financial emergencies.
Savings accounts allow people to save for big ticket items, such as a vacation or a down payment for a new home, in manageable, incremental amounts. By looking at the length of time you have to save and the amount needed, people can systematically save a specified amount of money to reach their goal.
Savings accounts are an excellent way to teach children how to manage money at an early age. Many banks have special accounts just for children that reward them for saving. Some experts feel that by opening a kid’s savings account that parents or grandparents can create lifelong savers.
Finally, anyone looking to build healthy financial habits should open a savings account. Most financial institutions allow automatic deposits into savings accounts so account holders do not even need to remember to transfer funds. By watching the account grow, impulse spending is often reduced since you may not want to spend those dollars you have saved on a spontaneous purchase.