The Pros and Cons of Saving Accounts

I’m sure that you’ve come across at least five articles that stress on the importance of opening up a savings account. In fact, few will go on to such heights that they will put “open a savings account,” at the very top of the list that discuss the steps of saving money.

As per Investopedia, “A savings account is an interest-bearing deposit account held at a bank or another financial institution that provides a modest interest rate.”

Now you must be wondering, is it really that important to open a savings account? Well, we have the answer to your question. But, first let’s talk about some of the pros and cons of opening a savings account.

Pros

A savings account is very easy to open. It usually takes just a few minutes to open a savings account and can be done in person at the bank, over the phone and even online. If you sign-up for a savings account at the time of setting up your checking account, some banks allow you to save big on bank fees.

The obvious benefit of opening a savings account revolves around the idea that your money is safe, even if the bank completely fails. As per the Federal Deposit Insurance Corporation, up to a sum of $250,000, remains insured and that you will never have to worry about losing your money, assuming there is $250,000 or less in the account.
However, the biggest benefit of a savings account is that while your money is safe, it is also earning interest. Money in your pocket, or stored deep in your closet misses out on this excellent opportunity of earning some interest. Although, the rate varies from bank to bank, it also creates sense of competition amongst the bank to offer competitive interest rates to retain customers.

Cons

Unfortunately, a savings account can also be a far less rewarding method of saving money. Many banks also charge a good amount of fees on their saving accounts. Some banks tend to pay very low interest rates. Some even require you to keep your money deposited for a specific time period that ranges anywhere from few months to even few years, in order to take earn more interest. Additionally, if you are intending to grow your account large, are expected to pay taxes on the interest you earn each year in the account.

Bottom-line

Saving money is an essential part of our lives & it is very important us to make financial decisions without any haste. We suggest that you take you time to review the pons and cons. Even when you have decided to set-up a savings account, we highly encourage you to do A LOT of shopping before settling with any bank.

Canadian Cash Solutions - Looking For A Loan?

What would you like to do?