Maximizing Your Savings: Exploring the Benefits of Savings Accounts

By Chandler Sullivan
March 13, 2024 | 5 Min. Read

A savings account can be a fundamental tool for anyone looking to build financial security, yet its importance is sometimes overlooked for more complex financial products. In this article, we’ll look into the role of savings accounts, savings account benefits, and address common questions surrounding their usage.

What is a Savings Account?

At its core, a savings account is mainly for saving money and earns interest, while a checking account is for everyday transactions and does not usually earn interest.

A savings account provides a safe location for your money while (sometimes) offering a modest return on your deposits. It’s a simple and accessible way to store funds and separate them from your everyday spending accounts.

Unlike investment accounts, savings accounts typically offer lower interest rates but come with lower risk and greater liquidity. They serve as a reliable option for short-to-medium-term financial goals and emergency funds!

Are Savings Accounts Worth It Anymore?

There are some universal common excuses and doubts about savings accounts, especially in today’s economic climate. You might be able to relate to these excuses for not saving:

  • “I will start saving once I pay off all my credit card debt.”
  • “I will save what is left after I pay my bills and living expenses.”
  • “I am still young. I don’t need to worry about saving for retirement yet.”

Although these excuses come with valid reasoning and often fear of financial distress, there are several ways to put savings accounts into perspective.

Despite fluctuating interest rates in recent years, savings accounts still hold value, particularly for individuals prioritizing capital preservation and liquidity over aggressive growth. While the interest earned may not outpace inflation significantly, the security and accessibility they provide make them worthwhile for many savers.

So instead of pushing off savings because of debt, expenses, or age, think of savings like this: Without savings to cover periodic expenses, it is difficult to stop adding to credit card debt. The sooner you start saving, the more your savings will grow. Additionally, take advantage of compound interest. Make a regular savings deposit before paying expenses even if it is only $0.05. Every amount counts!

Here are five advantages of saving money:

  1. Simple to start. Initiate consistent, manageable savings from each paycheck. It’s more beneficial to save $5 per pay period and have a small amount remaining before the next paycheck than to save $50 and need to withdraw $45.
  2. Compounding effect. Start saving a few extra dollars every week. This approach not only grows savings but also keeps individuals focused on their savings goals and boosts confidence.
  3. Reduced stress. Financial stress can lead to decisions that negatively impact health, relationships, or work. A savings account for unexpected expenses can alleviate this stress.
  4. Empowerment. Overcoming financial difficulties can provide a sense of accomplishment and inspire individuals to set and reach more ambitious goals.
  5. Achievable goals. Start with small, step-by-step goals. This steady progress fosters hope and encourages planning for bigger goals like retirement.

What’s the Best Account to Put Savings Into?

The “best” savings account varies depending on individual preferences and financial goals. Factors to consider include interest rates, fees, minimum balance requirements, and convenience of access.

Online banks often offer higher interest rates and lower fees compared to traditional brick-and-mortar institutions. Researching and comparing different options can help you find the account that aligns best with your needs.

Types of Savings Accounts

  • High-Yield Savings Account: A high-yield savings account is a type of savings account that offers a higher interest rate compared to traditional savings accounts. These accounts typically provide better returns on your savings, making them attractive for those looking to maximize their earnings on cash.
  • High-Interest Savings Account: Similar to a high-yield savings account, a high-interest savings account also offers an elevated interest rate compared to standard savings accounts. The primary goal is to help savers grow their money faster than with traditional accounts.
  • Certificates: These accounts offer a higher yield than traditional savings accounts because you agree to leave your money in the bank for a set term. The term can range from three months to five years or longer.
  • Retirement Accounts: Retirement accounts are specialized savings accounts designed to help individuals save and invest for retirement. These accounts offer tax advantages and are subject to specific regulations to encourage long-term savings. These accounts include: 401(k) Plan, Roth 401(k), Individual Retirement Account (IRA), Roth IRA, 403(b) Plan, and 457 Plan.
  • Best Savings Accounts: The best savings accounts are those that offer competitive interest rates, low fees, convenient access to funds, and excellent customer service. These accounts may vary depending on individual needs and priorities, so what works best for one person may not be the same for another.

Check out more savings options at Marine Credit Union.

What Is the Best Use for a Savings Account?

Savings accounts are commonly used for:

  • Emergency Funds: Providing a financial safety net for unexpected expenses or loss of income.
  • Short-Term or Long-Term Goals: Saving for upcoming expenses like vacations, home renovations, or purchasing a vehicle.
  • Opportunity Fund: Setting aside funds for future investment opportunities or major life events.
  • Peace of Mind: Offering a sense of security and stability in uncertain times.

Can You Have More Than One Savings Account?

Absolutely! Having multiple savings accounts can be beneficial for organizing and prioritizing your savings goals. For example, you might have separate accounts for different purposes, such as an emergency fund, a travel fund, or a down payment on a house. Just make sure you’re not spreading your funds too thinly across accounts and that you’re mindful of any fees or minimum balance requirements.

How Much Money Is Too Much to Keep in Savings?

Determining the appropriate amount to keep in savings depends on your individual financial situation and goals. As a general guideline, aim to maintain an emergency fund covering three to six months’ worth of living expenses. Beyond that, consider putting excess funds towards long-term investments or other financial goals, such as retirement savings or major purchases.

If you’re earning just enough to make ends meet, you may struggle to save your income regardless of how you live, especially if you’re supporting a family. Remember that it’s okay to prioritize your current needs. But future you will be grateful for even saving 10 dollars a month.

Saving remains a cornerstone of personal finance, offering security, liquidity, and modest returns on your deposits. While they may not offer the highest growth potential, their stability and accessibility make them invaluable tools for achieving financial goals and weathering unexpected expenses.

Here at Marine Credit Union, we understand the personal struggles that stop savings from happening. We are here to help guide and talk to you through your personal savings goals! Contact us today. We look forward to hearing from you and will assist any way we can.