According to Bankrate, it’s estimated that nearly 30 percent of all Americans don’t have any sort of emergency savings account. Furthermore, about 25 percent do have a savings account, but not enough funds in it to cover at least three months’ worth of expenses, which tends to be what financial experts suggest stowing away at a minimum. However, there are plenty more good reasons to have a savings account aside from just having a rainy-day fund to fall back on. In this post, we’ll cover some of the top reasons why it’s important.
Top Reasons Why You Need a Savings Account
- Develop Good Financial Habits
Perhaps the biggest reason to start and maintain a savings account is to get on a path of developing good financial habits. It’s natural for many consumers to want to spend money as soon as they receive it, but this isn’t the healthiest habit to get into. Having a savings account helps to organize your finances and helps you stick to a budget. Allocating a certain sum of your disposable income into a savings account can also help curb impulse buying. Finally, it can help you set goals for your future and stay disciplined meeting them, especially when it comes to saving for big expenses or toward retirement.
- Emergency Fund
While we never want to think about the unthinkable, it’s best to be prepared. It’s why financial experts suggest having at least three months’ worth of expenses tucked away in a savings account. This way if you were to lose your job, you’d have enough to get by for several months as you search for a new job and get back on your feet. Additionally, a savings account is crucial to paying for other unplanned sudden expenses, like car repairs, medical emergencies, appliance malfunctions and more. Having that buffer is key to powering you through the unexpected and preventing you from taking out loans or going into credit card debt to pay for the necessities. It’s estimated that only about 40 percent of all Americans have the funds on hand to cover an unexpected $1,000 expense, so don’t downplay the importance of such an account.
- Grow Your Wealth
While diversifying your financial portfolio is recommended to truly grow your wealth, a savings account can be a key part of this. For instance, keeping your funds in a high-yield savings account can earn an annual percentage yield (APY) of up to 0.50 percent. That’s significantly more than the standard savings account interest rate of 0.05 percent. The more you have in a high-yield account — and the more that you distribute into it — the more return you’re going to earn on your money.
- Peace of Mind
Last but not least, when you put your money into a savings account, you can rest assured that it’s safe and secure. Compared to carrying cash, it’s much safer to keep your money with a bank or a credit union. In fact, per U.S. government regulations, consumers are entitled to significant protections. Aside from peace of mind that your money is safe, you can also rest assured that it’s only an ATM visit away when you need to make a withdrawal.
For further advice and information, give us a call here at Firefighters Credit Union 608-784-9480.