5 Reasons to Open Savings Accounts

If you already belong to a bank, you probably started out by opening a checking account. You might even have credit cards with that same financial institution. But if you don’t have a savings account yet, there are several very important reasons you should look into setting one up – a few may seem obvious, but others may be those you’ve yet to consider.

Here are the top five reasons for having savings accounts:

1. Earn money

The best reason for opening a savings account is that unlike a checking account, your money can be accruing interest. Your bank will assign you an interest rate when you open your savings account. That percentage of the sum in your account is added on a monthly basis. It’s effortless to make money on your money.

2. Save for the future

In addition to earning interest on your savings account sum, you can more easily save for the future simply by opening a separate account. You are better able to mentally distinguish the money you’re putting aside for the future from the money that you’re free to spend on bills, debts and leisure activities. By compartmentalizing your income, you have greater motivation to save for the future.

3. Protect your checking account

In most cases, you can set up overdraft protection for your checking account from your savings account. This can mean one of two things. You can either automatically have extra money transferred into your checking account when it reaches a certain threshold, like $100. Or in the event that your checking account is overdrawn, the money can be pulled from your savings account to make up for it so that you never have to pay any penalty fees.

4. Full access with no risk

There are other ways to save and invest your money, but whether you’re assigning money to an IRA or investing in the stock market, there are always a certain number of limitations and risks involved. Your investments may be subject to market fluctuations or you may need to pay fines if you wish to withdraw funds. With a savings account, you can typically transfer and access your money a number of times each month without paying extra or encountering additional obstacles.

5. It might be free

In most cases, if you already have a checking account with a bank, it’s free to open savings accounts. If that’s not the case, you may be able to open an account without paying any additional fees by getting started with a certain minimal deposit, such as $1000. Check with your bank to learn the exact terms and conditions.

You can learn more about setting up a savings account by going directly to the bank with which you already have a relationship. For a general overview, you can visit the Discover Bank savings account page. The details (such as interest rates) may not stand for all types of savings accounts, but serves as a traditional example.

T.M. Murphy is a professional writer who lives in NYC. She currently specializes in fashion, beauty, marketing and finance articles. For easy-to-understand financial and banking advice on Discover Bank savings accounts, she turns to http://www.discoverbank.com. T.M. Murphy has been writing full-time since 2006, when she graduated with a B.A. in English from Northeastern University.