A savings account is a deposit account held at a bank or another financial institution where you can deposit a sum of money and get a modest interest rate. It is an interest-bearing deposit account, which serves as one of the safest ways to invest your hard-earned money.
In Costa Rica, you can easily access your money from your bank, whenever the need arises. However, banks or financial institutions may limit the number of withdrawals you can make from your savings account each month and they may charge an additional fee if you do not maintain a certain average monthly balance in the account.
A savings account is one of the conservative investment options, which helps you to store your additional funds safely with the bank. A savings account does come with a drawback that it gives only limited interest, but it comes with no risk, which acts as a major benefit in today’s world as you are earning money with no risk involved.
Savings account differs from checking accounts and is used for serving different purposes. Checking accounts do not come with any limits on the number of withdrawals that you can make every month. Checking accounts helps you in making payments conveniently. On the other hand, the savings account is beneficial for money that you do not intend to use for your day to day expenses. So, a savings account acts as a convenient place to stash extra cash.
As savings account earns you interest on your funds, it is more financially beneficial for you to put your extra funds in a savings account than a checking account. Also, a savings account is one of the most liquid investments, which allows easy access to your money whenever you need it. So, when you are taking into consideration your funds, savings account provides a ton of benefits without any risk involved. Here are the top 9 benefits of having a savings account that would definitely make you opt for one if you have not yet:
1. Earn Interest on your Savings
The 1st and foremost benefit of having a savings account are that it earns interest on your funds deposited. A savings bank account earns and pays you an interest, which is calculated by multiplying an interest rate with the amount of money deposited and maintained in your account. The interest rate also changes from time to time. For instance, in mid-2017, the Federal Reserve raises its benchmark interest rate because of the rising economic activity and improvement in labor market.
2. It solves your Purpose
A savings account keeps your deposits separate from your other money, such as cash in hand, checking accounts or long-term investments. Making regular deposits and seeing it grow can help motivate you to save. It is an ideal vehicle to save for a specific purpose, such as new furniture, a wedding or a vacation. If you want to save for several different goals, simplify your bookkeeping by opening multiple accounts.
3. You can easily access your money
You can easily access your money deposited in your savings account in case of an emergency. You can just withdraw your funds deposited to cover an unforeseen expense. Most banks and institutions provide their account holders with an online access to their funds 24 hours a day. Some institutions may also allow you to link your savings account to other accounts for quick and hassle-free transfer of funds. Being able to access your funds when you need is one of the biggest benefits of a savings account.
4. It keeps your Money Safe
A savings account in any bank or institution under government insurance helps to keep your money safe. For instance, the Federal Deposit Insurance Corporation insures banks and the National Credit Union Share Insurance Fund insures credit unions. This ensures all the account holders that their money is in the safe hands.
5. No risk involved
As mentioned above as well, a savings account is probably one of the safest ways to make an investment without any risk involved. The savings account also provides the facility to put your money into another investment whenever the opportunity presents. For instance, if a house in your locality becomes available and you want to buy it as a rental property, you can use your savings account funds to cover your down payment and help you to buy the property.
6. Set Automatic Deposits
Saving money from your day to day expenses and responsibilities can be a difficult habit to own. But, savings account comes with another benefit to solve this. A savings account enables you to set weekly or monthly automatic deposits from your checking account into your savings account. This way you do not have to worry about saving money from the unlimited expenses that you incur.
7. It Lets you link to your checking account
Many banks and financial institutions nowadays provide this facility to connect your savings account to your checking accounts, which proves to be beneficial for most of the account holders. Many people use their savings account to transfer money to their checking accounts whenever they are out of funds and their balance is running low. This way, they can cover shortfalls and avoid incurring overdraft charges and other fees.
One of the primary benefits of savings account is its liquidity. Withdrawing money from a savings account is as easy as it can be. The savings account allows an easy access to your deposited money whenever required. You can withdraw your money as often as you like using an ATM, bank teller, online banking, etc. But, government regulation allows you a maximum of 6 electronic transfers per month. You can opt for an online transfer if you need to withdraw more funds from your savings account and complete it in minutes online. Savings account helps to use our funds much easier when compared to taking money out of stock, bonds, and certificates of deposits, which results in penalties.
It is easy to open and start with a savings account. Many banks even link basic checking and savings packages that offer some fee and interest advantages. You can also find banks that offer no or low initial deposit options. These accounts are especially beneficial for a young person learning to save for the 1st time.