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What Is A Savings Account Used For?

Written by Banks Editorial Team

Updated April 21, 2021​

2 min. read​

Do you know what a savings account is used for? The savings account is an account that earns you interest when you deposit your money in the bank. The interest earned differs from each bank. Having a saving account helps you keep your cash safe while it grows due to the interest. While some banks give an interest rate of between 3.5%-7% per year, most banks pay an interest rate of 2% per year. Some choose to open a savings account use that offers a high interest, but requirements and fees may vary from bank to bank. So it’s advisable to choose wisely. You may open a savings account either online or go in person to a bank. Start by researching savings account interest rates in your area:

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Maximizing What a Savings Account is Used For

The savings account helps in various ways majorly in interest earning and securing the future. The cash saved can be used to plan financial activities like education, vacation, and many others. When you save there is a duration it will require you observe before you can begin withdrawing your cash, so it’s advisable to have various accounts like a checking account in case of emergencies. With a saving account, your unnecessary spending is cut off. This is what a savings account is used for mainly.

The art of saving money earns you interest of around 2% annually while it’s being kept safe with no risks involved. Some banks give higher interests for their clients, the interest is between 3.5%-7% per year. This majorly depending on the type of bank because they vary in interest giving. The advantage of a savings account is that the monthly maintenance fee is not charged till the time of transfer or withdrawal. Find the best savings account option for you:

The Benefits of Savings Accounts

In the United States, federal laws cover savings accounts that have up to $250,000 if the banks fail to cover them. These laws also limit the amount of cash someone withdraws or transfer within six months after the initial deposit. This helps to cut withdrawal which is not necessary.

Someone may ask what a saving account used for and the simple answer is to help your money grow. Savings accounts are not as easily accessible as checking accounts for this reason. With this restriction in place, interest on your money grows hence the growth of your savings. This is why it’s advisable to have different accounts example checking account, in case an emergency occurs.

This can be done by creating a saving account either online or in person at the bank and after depositing an initial deposit. The duration of saving can be six months, 1 year or more depending on personal needs.

The savings account helps in financial management. Some people are not good at spending money, i.e they don’t spend wisely. Creating a saving account helps in cutting unnecessary spending because they save extra money which should be used in the future.

Additional Uses for a Savings Account

Another useful purpose of a savings account is that it can be used in loan transactions like equated monthly installment for home, rent and investment plans which are systematic (SIPs).

The substitutes to savings account are Money Market Accounts (They are like to saving accounts but MMA pay interests on deposits and they usually limit how you conduct certain transfers.), Online Savings Accounts (They are cheaper compared to brick and mortar banks. They have fewer fees.) and Certificate of Deposits (They are good for emergencies, they led you to commit the duration you want to save money example 1 year, two years etc. But if you cash out earlier you pay a penalty fee. Other CDs don’t have a penalty fee.)

This can be done also by creating a saving account and linking it with your bank to pay off loans
or checking account to facilitate withdrawals.

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