The Best Ways to Make a Savings Account Work for You

One of the oldest methods of storing money away in a bank is by using a traditional savings account. These used to be called “passbook savings” accounts, because years ago, you were given an actual book that showed your deposits and withdrawals which were entered by the bank when you made a transaction. Then, technology changed all of that. With electronic banking, all transactions are handled by computer – no more “passbook.” But does that mean that savings accounts are obsolete? Why would a person still have a savings account? Savings accounts still have a place in our financial activities as you will see here.

They might be old-fashioned, but they still serve a purpose. The best ways to make a savings account work for you are noted here:

For Earning Interest

Because savings accounts allow for the free movement of money in and out of them when needed, interest rates are relatively low when compared to other forms of accounts that pay interest. Even so, it is wise to look at the interest rate if for no other reason than to make sure it is competitive with other financial institutions. For Short Term Purposes You should have two types of savings accounts. The first is the traditional savings account for short term purposes. This is money that could be used for emergencies and other reasons which call for a smaller amount to be ready for use at any time. Long term savings accounts are those that pay a higher amount of interest and where you will want to place money that you do not want to touch for longer periods of time (for the purpose of income replacement in case something happens and you cannot work). These long term accounts are usually certificate of deposit accounts or money market deposit accounts.

For Managing Your Money Better

Having more options is a good thing when working with your finances. Should you need a temporary place to park some money that you are getting ready to use or accumulate quickly, a savings account is a good place to perform this action. Because it is easy to obtain access to, it helps in this circumstance. Think about that the next time you are getting ready to plan for a vacation.

For Keep Savings and Checking Together

One reason to open a savings and checking account together is that you can move money freely between your accounts within the same financial institution. And, there is usually no lag time between when the money is moved and when you can access it. This means more flexibility for you. For Watching Fees Even though you can transfer money between financial institutions relatively easily with electronic banking, sometimes there are fees involved. Also, some savings accounts have minimum balances that keep you from being charged a monthly fee. All of these can eat away at your savings, so you need to keep up on the requirements for your savings account at your financial institution.

For Security

Not only is your money guaranteed by the federal government, but there is another security reason to put money into a savings account. Identity theft and other illegal activities. Think about this: some people use their checking accounts to pay for things that they purchase on the Internet. Doing so places you at risk, because if your account numbers should ever be stolen, you are protected if you have money in your savings account because those account numbers are different from your primary checking account numbers. Good old savings accounts are still alive and well. Make sure you are using them in your financial strategy.