One of the most common forms of financial accounts available today, and likely one of the first types of accounts you'll have after a standard checking account, is a personal savings account. With a personal savings account, you have the opportunity to ensure your money is kept secure and safe while it earns a certain amount of interest every month. Usually, these accounts don't require much of a minimum balance in order to be set up, and some banks will not ask you to have any minimum balance whatsoever. It all depends on the bank you choose. So why should you bother with a savings account when you could simply keep your money in your checking account, or hidden away under your bed?
Keeping Your Money Safe:
The biggest, and perhaps most important reason for getting a personal savings account, is that your money will be safer. Besides the fact that placing your money into a savings account makes you less likely to spend it, meaning you're more capable of saving up extra cash, putting your money in an account such as this is more secure, because it is insured. If you have your money stored underneath your bed and your home burns down, then your cash is lost forever. On the other hand, credit unions and banks will keep your money carefully stored in a fireproof and locked safe.
Through the federal deposit insurance corporation, banks will insure up to $10,000 of your money, meaning that even if a bank was to go out of business, you don't lose your cash. Since the FDIC began, not one person has lost any money in a credit union or bank that has been insured.
Make Money, on Your Money:
When you place your cash in a personal savings account, you start to earn interest on that amount. Interest is the cash that the bank pays to you so that it can use your cash to finance other people's loans. However, this doesn't mean you can't access the cash you need whenever you want it.
The amount of interest that your money earns through a savings account will depend on the type of bank or financial institution you have chosen to go with, as well as your specific account. Banks, for example, will generally offer two different types of savings accounts to their customers. The first is a basic account for savings, which usually has no minimum balance requirement, and offers a pretty low interest rate. That means that your money won't earn much over time, but you can withdraw your cash whenever you want.
The second option is a money market account, which often pays far more in terms of interest, but typically requires consumers to pay more cash into their account. You might find that with this form of account, you also have a limit on how many withdrawals you may be able to make within a single month. Sometimes, in addition to your withdrawals, you will be able to write a certain amount of checks each month, too.