The most basic step you can take when starting to save money is opening a savings account. Sometimes, though, this can seem like an unnecessary hassle.
After all, why go through all the trouble of setting up a savings account? It's not as though a savings account is any different than a checking account, except that it might pay you an extra few cents a month. For that matter, why set up a secondary account at all when you could just make sure to mentally set aside a certain amount in your checking account?
The truth is that putting your money in a savings account offers several advantages you wouldn't get otherwise.
A Savings Account Makes Saving Easy
The best reason to open up a savings account is that it makes saving money easy. When you're taking out the recommended 10% of your income, putting it in a savings account it gives you a clearer idea of what you have put aside than keeping track of it in your head.
Even better, you can usually get your employer to use direct deposit to put money into your saving account directly from your paycheck. This eliminates the risk of you forgetting to do it yourself. It also means you won't be tempted to spend the money on other things, especially if you have a tight budget.
Savings Accounts Usually Don't Have Fees
A checking account is also known as a transactional account. As a result, financial institutions expect the account holder to make frequent deposits and withdrawals.
A checking account, with very few exceptions, almost always has some type of fee attached to it. It might be something understandable, like a fee for overdrawing your account, or it might be a "convenience" fee for using an ATM. As you're probably aware, a lot of checking accounts have several potential fees.
Savings accounts, on the other hand, are not transactional accounts. While you can still access the money you keep in a savings account, its purpose is really to provide long-term storage for your money. This means there are usually no fees, although some financial institutions may require you to maintain a minimum balance in the account.
Even better, financial institutions will actually pay you to keep money in your account, this is known as dividends. You can consider it a bonus for keeping your money with the financial institution.
Savings Accounts Are Stable
A savings account is also risk-free. If you try to keep your saved money in a checking account, you'll always have to be on guard against financial institution fees, not to mention your own temptation. Put your money in a savings account, though, and you usually won't have to worry about fees or temptation.
A savings account also protects your money from the financial institution itself. Thanks to the FDIC and NCUA, your money is insured up to $250,000, so you can rest easy. (If you need to save more than $250,000, you probably have a different set of financial problems altogether.)
Savings Accounts Let You Access Your Money When You Need It
A savings account will let you make a withdrawal whenever you need to. Since financial institutions rely on the money in savings accounts in order to make their loans, there are some restrictions on how much you can withdraw at one time and how often you can make withdrawals, but you can almost always withdraw enough money to cover your expenses if an emergency occurs.
Get a Savings Account at First Alliance Credit Union
Having a savings account is just a smart financial move. It not only gives you access to an emergency fund that will increase your financial stability, but it will also set you up to make plans for the future, including investment and retiring.
If you want to open a savings account, give member services at First Alliance Credit Union a call. You can get started saving with as little as five dollars!