Saving money is a productive habit, and one that most children are taught with their first piggy bank. In the current economy, however, some people might be wondering, “Should I open a savings account?”
A recent GOBankingRates survey uncovered concerning findings about Americans’ saving habits. The survey found that 17.36% of respondents do not have even one savings account. Surprisingly, the age group with the highest percentage without a savings account was 55-64-year-olds at 28.91%. Meanwhile, those aged 18-24 were more prepared, with only 13.51% reporting zero savings accounts. The survey also highlighted differences between genders, with 18.31% of women respondents saying they do not have a savings account, compared to just 16.25% of men.
Overall, the survey highlights a lack of sufficient savings across demographics and underscores the need for many Americans to take better control of their finances by building emergency funds and savings.
Here are 11 reasons to open a savings account today.
Be Prepared for Emergencies
One of the top reasons to open a savings account today is to prepare for unexpected emergencies.
As James Anderson of SmartMov explained, “One of the main reasons to have a savings account is creating a cushion in case of emergencies. Right now, many people rely on their credit cards as that safety net, but credit cards come with interest rates hovering above 20%, and relying solely on credit cards to cover unexpected expenses can lead to accumulating high-interest debt, making a difficult situation even more stressful.”
Anderson highlights how financial stress can take a serious toll on your mental and physical health. Knowing you have savings available provides comfort and reduces anxiety when emergencies inevitably come up.
Cover Predictable Expenses and Earn Discounts
Another great reason to have savings is the recurring expenses that happen annually or semi-annually and taking advantage of discounts, said Anderson.
“Did you know by paying your auto insurance and home/renters insurance annually, you can get a significant discount on the premium?” he said. “Which allows you to have more money for other things! I like to call this the fly-wheel effect because of how powerful it really is. First, you save up for your annual insurance payment, then you take the savings from paying annually to save to cover the deductible, which allows you to begin to raise the deductible, giving you more of a discount — which allows you to save more money to buy the things you want instead of insuring the things you have. Building real wealth.”
A savings account enables you to pay for predictable annual or semi-annual bills upfront and earn discounts for doing so. For example, paying your auto insurance premium annually instead of monthly can score you a nice discount, leaving more money in your pocket. You can then use those savings to cover deductibles or other planned expenses. It becomes a positive cycle where saving begets more savings.
Having a dedicated savings fund allows you to take advantage of discounts and make your money work harder through strategic planning.
Avoid Pricey Debt
When cash is needed, the alternative to savings is borrowing money or paying with credit cards. But loans and credit card interest can be an expensive way to cover costs compared to using your own savings. Building savings now can prevent you from incurring debt down the road.
Weather Economic Downturns
Job loss or reduced income is difficult with no savings to tap into. Having several months of living expenses in the bank provides a vital buffer between jobs if you experience a layoff. Savings helps you ride out recessions or slow economic periods without going into debt and just gives you peace of mind when it comes to your money.
“Having savings provides financial security and reduces stress when unexpected costs arise,” said Andrew Lokenauth of Fluent In Finance.
Save for Major Purchases
Savings isn’t just for emergencies. Opening a separate savings account can help you achieve shorter-term goals like buying a car, making a home down payment or affording a dream vacation. Watching your dedicated savings grow keeps you motivated.
Gain Control of Your Finances
Opening a dedicated savings account requires discipline and planning. Tracking your savings goals helps you become more organized and get a clearer picture of your overall financial situation. “Regularly contributing to a savings account builds discipline and smart money management skills,” said Lokenauth.
Bonus: People who actively manage their money tend to make better financial decisions.
Pay for Education
As college costs continue rising, a savings account is one of the best ways to prepare for this large future expense. Parents can open a 529 account and watch it accumulate over their child’s lifetime. Education savings helps reduce reliance on student loans.
Build Financial Options and Flexibility
Savings equals possibilities. With cash reserves, you can take advantage of opportunities, whether it’s investing in a business, moving to a new city or simply having the ability to enjoy pricier purchases guilt-free. Savings = freedom.
Preserve Your Capital
While savings accounts have low interest rates, the goal is capital preservation. Keeping cash in insured savings accounts ensures your principal will not decrease in value like riskier investments. Savings provides a stable foundation in uncertain times.
Make Saving Automatic
One of the best ways to save is making regular, automatic transfers from checking to savings so the money is tucked away before you can spend it. When savings is out of sight from your everyday spending, you’re less tempted to dip into reserves.
Reach Your Goals
Watching your dedicated savings grow with regular contributions provides motivation and a sense of accomplishment. Use your savings to realize dreams big and small. Tracking progress over time can keep you committed to your financial plan.
Not only that, as Reagan Bonlie, the founder of Nudge — a financial wellness and planning app — shared, you can earn interest on your deposited money. “Unlike a regular checking account, which typically generates little to no interest, a savings account allows your money to grow over time, since rates have increased in recent years,” he said. “The interest earned can add up significantly, helping you achieve your financial goals faster.”
Today is the perfect time to take control of your finances by opening a dedicated savings account. Start small if needed — any amount is better than nothing. But make it a habit to consistently contribute, with the ultimate goal of building three to six months’ worth of living expenses. Your future self will thank you!
Caroline Banton contributed to the reporting for this article.
Methodology: GOBankingRates surveyed 1,037 Americans aged 18 and older from across the country between Sept. 5 and Sept. 7, 2023, asking five different questions: (1) How much money do you hope to save in the next year?; (2) What are you saving money for?; (3) How many savings accounts do you have?; (4) What is the primary method you use to save money?; and (5) What is your biggest roadblock/challenge in trying to save money?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
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