Earn Interest from a Savings Accounts
If you're keeping all of your cash in a checking account, you could be missing out on hundreds of dollars in interest. Even a simple savings account will help you earn money, while keeping the cash close at hand.
Savings Benefit #1: Interest
Checking accounts, prepaid debit cards, and cash all have one disadvantage when compared to a savings account; no interest is paid on the balance. Many people are unaware that when money is deposited in the bank, the bank uses those funds to invest and make a profit. With a checking account, the bank does not give interest because of the immediate access offered on cash deposited. However, with a savings account, the bank gives the account holder a cut of the profit in the form of an interest rate.
Interest on a savings account is often offered around 1%, but there are accounts that offer up to 4% interest. If you want to find out how much you could make with the amount of money you want to deposit into savings and the amount you plan to save monthly, you can use an interest calculator for savings accounts. This will show you that a savings account can be worth much more than a checking account.
If you are not convinced that a savings account is for you, consider this scenario:
You have $5,000 in checking, that could easily be transferred to a savings account. The savings account would earn about 1.5% interest every year. Over the course of the year, you would earn $75 in simple interest. Interest on a savings account is actually compounded daily, meaning that interest is computed and added to the balance every day, so your interest earned would exceed $75. This is a significant amount to earn with the simple act of moving money into an interest bearing account.
Savings Benefit #2: Liquidity
While a savings account will not come with a check card or paper checks that allow easy access to funds, the cash in savings is still liquid. This means that the account holder can easily and quickly access the cash in the account.
You bank will likely issue you a debit card when you set up your savings account. If one is not offered, request one. This card can be used at any ATM to withdrawal funds from your savings account. If you prefer not to use an ATM to withdrawal funds, you can go directly to your bank and fill out a withdrawal slip.
If you have both your checking and savings account at the same bank, most banks will allow you to transfer funds between the accounts from the comfort of your own home, using online banking.