4 Common Budgeting Mistakes
- No specific motivation
- Unrealistic spending estimates
- Overlooked expenses
- Too many restrictions
Like an IRA or a 401(k), a savings account has an important place in any family’s financial plan. Traditional savings accounts offer an opportunity to earn steady returns on deposited principal, and often carry less risk—and may require less decision-making—than more complex investments. Here are four reasons why savings accounts are an attractive way to help secure your financial future.
1. They’re safe.
Preserving hard-earned money is a high priority for just about everyone. The Federal Deposit Insurance Corporation (FDIC) insures the deposits of banks to the maximum allowed by law.
FDIC insurance is backed by the full faith and credit of the US government, meaning the US Treasury stands behind FDIC-insured depositors. According to the FDIC, no customer has ever lost a single penny of insured deposits in its 73-year history.
2. You don’t need to do anything to make money off your principal.
One of the best things about savings accounts is that the money you deposit automatically earns interest, and that interest compounds over time, accelerating the growth of your money. You rarely have to make any decisions (other than which bank to save with; some offer higher interest rates than others). Just deposit money and you’ll receive an update on your balance with each statement.
3. You can easily link to other accounts.
Many banks allow you to link your savings account to your checking account, or even accounts at other financial institutions. Connected accounts make it easy to move money around, especially when you have established financial goals that require monthly and/or automatic transfers.*
4. Limitations and requirements are few.
If you’re at least 18 years old and you meet the bank’s minimum initial deposit requirements, you can open a savings account at most institutions. As a result, it’s not uncommon for parents to open savings accounts for their young children to impart the value of saving early on.
Savings accounts are an essential component of any family’s financial plan. They are easy to establish and safe once you do—plus, they generate steady returns with little management. The only question is whether you can muster the discipline to continually funnel deposits their way. It’s worth trying; building a solid nest egg can have untold payoffs for you and your family down the line.
* Federal law limits certain types of withdrawals and transfers from savings and money market accounts to a combined total of 6 per calendar month per account. There are no limits on ATM withdrawals or official checks mailed to you. To get an account with an unlimited number of transactions, consider opening a Discover Cashback Debit account. If you go over these limitations on more than an occasional basis, your account may be closed. See Section 11 of the Deposit Account Agreement for more details.
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1 “Expenditures on Children by Families, 2015,” Revised March 2017, Center for Nutrition Policy and Promotion, United States Department of Agriculture.
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