In today’s modern world of the twentieth century, the concept of opening up and using a savings account is considered joke. Many years ago the interest paid on savings accounts was in real numbers, i.e. numbers that came before the decimal point. Now days, banks seem to have fun trying to see how many zeroes they can fit into the interest rate after the decimal point, e.g. 0.0001 percent. Although it seems ridiculous to think you could ever make a return on investment with a savings account, they can be viable a viable investment strategy. So here is a summary of the actual advantages of savings accounts.
The Obvious Advantages Of Savings Accounts
Generally speaking, there is a time delay when you want to access your money from an investment. However, with a savings account, you have immediate access. So if something happens, such as the air conditioner breaking during the heat of summer, or the washing machine shuts down never to clean clothes again, and you have enough in your savings, you can use that money immediately for your problem
There is only one rule when it comes to investing, and that is ‘don’t lose it’. So when it comes to the safety of your investments, a savings account is hard to beat. This is because the Federal Deposit Insurance Corporation guarantees as much as $250,000 of your money that is in a savings account. Note that there are conditions so not all cases will comply. But this guarantee makes having a savings account the safest option for your future investment.
3. Simple to start
There are no background checks or a financial advisor scrutinizing your income, no conditions or minimums required. Anyone can open a savings account, just fill out the form and you’re on your way to a brighter financial future.
The Not-So-Obvious Advantages Of Savings Accounts
Unfortunately we all have heard the obvious advantages so many times that we’re sick of no one pointing out that those savings accounts have terrible returns. However, this fact alone is one of the not-so-obvious, actual advantages of savings accounts.
4. You Don’t Need To Know Anything
When it comes to investing many people are at a loss for knowledge on the topic. It can be quite intimidating; there are so many avenues, so many things to consider if they are right for you. But the advantage of a savings account is that you don’t need to know anything. You just need to put your money into it, and keep putting money into it. So even if a savings account is not right for you, if you put all your extra money in there for now while you learn about investing and come up with your own plan, then you can always reinvest what money you have deposited into your savings account.
5. You Don’t Need To Take Any Risks
We’ve already pointed out how a savings account is the safest form of investment and you have immediate access to your money. So if another investment opportunity comes along all your money is already in one place and ready to be moved. And even if a savings account isn’t your end goal it’s also a great place to keep all your investment money together while you save to purchase stocks or bonds, or save up to put together a down payment on an investment property.
6. You Buy Time To Learn
As touched on earlier many people have no idea about investing and it is a deep pool of knowledge to consume. There are many ways to invest, different risks to consider and certain funds that must be in place in order to start some investment strategies. But by keeping all your investment and extra money together in one account, you’re already on your way to a better investment future because you have simply started, and this buys you the time to learn about investing and what is the right strategy for you.
7. Positive Reinforcement
Although a savings account is not the most elegant of investment strategies, it is simple and it does show short-term results. It may not be much, but it is more than you had to begin with. This is because savings accounts provide you with instant feedback, and with this slow but steady increase it can produce a positive-reinforcement like effect that motivates you and makes you want to challenge yourself to see if you can do better.
8. Time Is On Your Side
In the case of a savings account, for the first ten years, the main portion of your investment will consist of your own contributions. However, once the cumulative contributions begin to add up to what we would consider as ‘real money’, then the returns on investment, interest in this case, also begin to add up which results in a definitive boost to your investment.
In fact savings accounts are no different to most investment strategies in that you won’t begin to see noticeable changes for five to ten years, so when you decide to invest you can put all your money into a savings accounts while you spend a couple of years learning and you won’t lose out by a lot.
However, this doesn’t mean you should put off opening a savings account until you’re ready to start learning about investing. Otherwise you’ll just keep procrastinating. The key to investment success, along with a lot of things in life, is to just get started. And a savings account is a simple, safe way to get started.
While 8 advantages of savings accounts have been listed there are only a few recurring themes that you really need to take away from this:
- Simple to set up and use, you don’t need to jump through hurdles to get one and you don’t need to know anything about investing to have one.
- Safe, they are low risk and you always have immediate access to your own money.
- Time giving, they get your foot in the door quickly, they let you see short-term results, they let you see long-term results, and they give you time to learn about investing.