You may wonder why savings accounts are highly-revered banking tools when their interest rates are so much lower than other forms of investment that allow for higher returns. There are a number of reasons that people prefer to take this route for financial gain rather than the many other options on the horizon. Let’s take a look at a few.
No Risk Involved – With savings accounts you don’t have the same risk concerns that you may have with playing the stock market. In the stock market, you’re investing money in a company with hopes that its share prices will rise after buying your shares. However, taking this route puts you at risk of the prices dropping, which results in loss. This is a concern you don’t have with a savings account because you’re allowing the bank to borrow your money, and in exchange they’re offer interest rates that allow your money to grow. No more, no less.
Low Costs – Unlike the stocks where you have to pay a certain share price to get started, or mutual funds that also typically require a pricey minimum deposit amount to get started, you can usually open a savings account with a relatively low deposit amount. This makes getting started a lot easier.
Convenience – Another benefit of keeping money in savings accounts is being able to gain access to the money when you need it. You can link your account to your ATM/Debit card, or simply walk up to the counter and withdraw some when you need it. Also, you typically have immediate access to your funds. And as long as you stay above the minimum balance, you will never hear any gripes from the bank.
If you’re looking to make big bucks through your investments then working with savings accounts probably isn’t the route you want to take. But if you are looking for a safe place to store money (funds are FDIC insured up to $100,000) and don’t mind allowing interest rates to increase your funds then this is definitely not a bad road to travel.