Start Young; Start Now. This is a common line banks use to motivate individuals, especially young adults, to start saving up a dividend of their earnings every month. For young adults, starting early is the best to make sure you get the best of your investments in the future.
But first, what are savings accounts?
What Are Savings Accounts?
Savings accounts are extremely convenient way of managing money that provide tons of benefits to the customer. They are also generally mobile and are quite easy to manage. They are easy to open and also easy to deposit to and withdraw from. Thing is, you need to be smart when opening your account and picking where you want to open your account, with a bank, a financial institution, or an investment firm.
Let’s discuss a little bit of basic knowledge when it comes to savings accounts. Just some common knowledge on the topic to get you saving.
The Basics of Savings Accounts
Savings accounts provide you with a safe and secure place to stash your hard-earned cash for short-term or long-term periods. Their safe and reliable and gives you an option to store your savings and not worry about it too much.
Savings accounts offer you various benefits such as adding to your savings by the interest rate you earn the longer you keep your money. The pay is typically modest, but in time, with patience and self-control to not empty your whole account on something you don’t necessarily need, you can benefit largely from this interest rate. So in a way, it really pays you to save your money.
Another basic fact that is associated with savings accounts is that they generally don’t need that much to maintain them. Most banks and financial institutions don’t necessarily require a maintaining balance for their customers. Some do have maintaining balance but they’re usually low.
A savings account is very beneficial after long periods of time. For example, you might need emergency funds in the future for an important medical procedure or you need funds for a car that you really need. In any case, savings accounts are very beneficial in emergency situations you might experience in the future.
Advantages of Having a Savings Accounts
A big advantage with savings accounts is that, as mentioned earlier, a great and secure place to store your large amount of savings. Saving money isn’t exactly a piece of cake, to assist you with this task, banks and financial institutions have accounts that you can open so that you can establish your own savings account.
You can open a savings account with a bank, financial institution, investment firms, and brokerage firms. You can also open and manage a savings account fully online now thanks to banks and other programs opening their doors to the future of banking.
Savings accounts also provide you with full access to your funds anytime and anywhere thanks to mobile apps that you can use on your smartphones or laptops to monitor your cash and make remote withdrawals or deposits.
Disadvantages of Having a Savings Account
Though savings accounts have many benefits and upsides associated with them, they also have a number of disadvantages. Here are a few:
Availability of Savings
The ready availability of your savings can pose a big disadvantage. For example, you may be tempted to spend what you earned because your access to it is very easy. You could also be tempted to take your money out to invest them in stocks. This can pose a very big disadvantage to your long-term saving.
Existing Withdrawal Cap
As of 2020, the withdrawal cap set for savings accounts is 6 per month. If you need to access your funds frequently, this can prove as a big disadvantage. If you withdraw more than 6 times per month, the bank or financial institution you opened your account with could suspend or close your account indefinitely.
Risks of Hackers
There are many extremely skilled hackers who can bypass a bank or financial institution’s security measures quite easily. They can bypass their security systems and hack into your accounts and take your money. Though measures have been taken to shrink this risk and further avoid loss of funds due to a cyber-attack.
Sure, savings accounts may be a very useful tool for financial management. Whether you’re a family man or a young adult looking to secure your future financially, you can benefit greatly from having savings accounts.
Whether you’re saving up for something in the short-term or long-term, a savings account will help safeguard your money for whatever is that you need. Savings accounts are also very useful when it comes to emergency situations. Saving up early will help you increase the rate of your savings which also increases the rate of interest you can earn.
There are precautions to consider though especially if you opt to acquire an online savings account. Nonetheless, if you weigh the advantages with the disadvantages, you can be sure to reap the benefits of owning a savings account not only now but in the future.
Reasons Why Young Adults Should Have a Savings Account
Savings is an extremely important aspect of one’s future, especially for young adults. Money is extremely important, then and now, and with the continuous depreciation of the value of money because of “Inflation”, it’s now become more important.
A savings account can be an absolute lifesaver for young adults. Starting a savings account early can be very beneficial for you both in the short-term aspect and long-term aspects. A savings account is necessary for anyone. Let’s take a look at a few reasons why young adults should have savings accounts.
ONE: Savings Accounts Can Be Very Helpful in Emergency Situations
From having to deal with emergency healthcare needs to have to deal with sudden tragedies and natural disasters, a savings account will help you get through the days when you cannot immediately go back to work and earn money.
Having a savings account in your name can serve as a cushion from when situations can be tough to deal with and earning money may not be possible for quite some time.
TWO: Savings Accounts Offer You Different Forms of Conveniences
If you’re worried about the convenience, instead of opening a traditional savings account, why not open one online? Online savings accounts are very popular and common these days, they’re convenient, easy to use, and can be very simple to maintain. Once you’ve opened one, you can monitor your online savings account with a simple tap on your phone or a simple click on your keyboard and mouse.
You can pretty much do anything with your online savings account anywhere and anytime with any kind of mobile device, a smartphone, tablet, or laptop. This makes things extremely convenient for you now since instead of having to go out to a bank and wait in line for long periods of time just to check your savings or make a deposit, you can do it all on your bed in the safety and comfort of your own home, not bumping into random strangers in the heat.
Besides the perks of being able to save our money somewhere safe, modern savings account programs, online and offline, also offer other services such as paying for your purchases through the use of your debit or savings account. Paying for bills and scheduling regular payments for recurring financial obligations and so on and so forth. These added features give you more power as a consumer and a stronger take on how you manage your hard-earned money.
THREE: You Control the Money, Not the Other Way Around
With a savings account, you can avoid those situations where you just earned your month’s salary and in just a few days, you realized you’ve spent it all. Once you have a savings account in place, as soon as you earn money, you can decide how much to keep in your wallet and how much to save in your savings account.
If you opt to receive your money online through your online savings account, you may opt to schedule your savings. This means that once your salary comes in, a percentage of the earning will immediately be kept away for savings. Others enroll their savings account in a timed investment that is offered by the bank as well. This means that the percentage of earnings that they decide to keep as part of their investment will not be accessible until a scheduled time of release. Often, these types of investments require that you keep and not use the money as an investment with the bank for at least five years and more. The rewards of this type of investment in your savings account are bountiful. In due time, depending on the time of availability of funds that you choose, your money could earn up to more than 200% of the principal amount.
These savings options will certainly help you improve your self-control while avoiding losing money on things you don’t necessarily need. Thing is, even when you already have a savings account and you’re already depositing money into it, you’d still need self-control to avoid withdrawing all of your savings and spending it in one go.
As a young adult, you may have many wants that you think are needs. It’s better to learn early about the value of money and how to avoid being an immature spender. Telling this to yourself constantly will help you to avoid losing all your money because of an impulse.
So far, we have discussed only three reasons why you should open your own savings account. But generally, there are way more than just three reasons why you as a young adult should have a savings account.
As mentioned, savings accounts can provide you with many short and long-term benefits. They can help you conveniently in emergency situations as well. As long as you have enough self-control over your spending impulses, you will surely be able to have a bright future and have enough money for yourself and your future family.
What are the Top Savings Accounts for Young Adults?
Having personal savings can be an absolute lifesaver.
Just imagine an emergency came up that involves the need to spend a significantly large amount of money, you might not have the money in cash, but then you remember: “Oh right I have a ton of money in my savings account!” This thought can be very true for young adults, savings can assist in paying for many bills like tuition, food, clothes, or gadgets.
Thing is, in order for you to save a lot of money and not spend it in one go, you have to find the perfect savings account that works for you. Let’s take a look at some aspects you should consider before picking the right bank or financial situation to open your own savings account with, but before we do, let’s take a quick look at what a savings account is.
A savings account is an entity that stores money that is usually held on to by a bank or financial institution. The bank or financial institution that holds your savings circulate the money around by lending it to others. Basically, savings accounts are a big source of income for the bank or institution you opened because they can turn the money around to their other paying customers.
A great thing about savings accounts is that they offer interest rates that tend to match up with the amount of money you have in your account for a certain span of time.
Another important detail when it comes to savings accounts is that they usually have a minimum balance that is required to avoid high monthly fees, though there are other savings accounts that don’t have a minimum balance requirement. That is why you need to be very smart when it comes to picking where to open your account.
Now, let’s see your options when it comes to where you can open an account and what the top savings accounts are for young adults.
Basic Savings Account
You can open basic savings account with various banks or financial institutions. You can also open savings accounts with online-based saving programs, brokerage firms, and investment firms. As mentioned earlier, a basic savings account have an interest rate that you can actually earn from, it is generally variable and it is usually not the same for every bank or institution.
The rates are usually fixed until a certain date that is set specifically by the bank or from wherever you opened your account with. The bank, institution, or firm that you opened your account with has legal rights to lower or heighten your interest rate based on their needs.
As mentioned earlier, a basic savings account has a minimum balance that you have to reach in order for the bank or institution you opened your account with not to close your account or charge you with a fine or fee.
This is only a little bit of basic knowledge when it comes to basic savings accounts, though the information may vary depending on the bank or financial institution of your choice.
Checking accounts are a little more convenient compared to basic savings accounts. Checking accounts provide physical debit cards that you can use for withdrawals and deposits from and to your account. There are also banks and institutions that provide mobile apps with your checking account so you can monitor your savings regularly and more conveniently.
When it comes to online checking accounts, the institution or bank that you opened your account with offers several methods and ways so that you can conveniently make deposits and withdrawals that can vary from other bank systems.
If you link your checking account with a separate basic savings account, you can make deposits and withdrawals a whole lot easier. You can transfer funds easier and simpler. Direct deposits and wire transfers are made way easier as well.
Savings can be very beneficial to not just you, but your family as well. If done well and smart, you can benefit from saving money and opening a savings or checking account. These two account types are on top of the list of best savings account types.
Be very careful when picking how to save your money and what type of account you want to open as this will determine the future of your hard-earned money.
Other Types of Savings Accounts to Choose from for Young Adults
The reason why this list has been separated from the ones featured in the previous section is that they present a specifically focused attention on the concept of ‘interest-rate and earnings based on time.
One: High- Yielding Savings Account
This type of savings account is for those who want to engage in a savings program that yields high competitive rates in interest-based earning while minimizing the fees they pay the banks.
This form of savings account is often offered by online banks. It is important for those who enroll their savings in this type of savings account to be able to track the growth of their money in real-time. The reason behind this account being high-yielding is because you are going to enroll your money at a much less secured process of safe-keeping. Processing the money for release or transfer often takes time under this type of savings. The promise of letting the bank use your money, manage it for longer times would give the bank a better take on how they are going to pay for the interest rate that you have agreed given that you will not touch or spend your savings within a specific given time.
Two: Money-Market Account
For those who want to earn more from their savings but also want to have ease of access to their money in the bank, the money-market account may be the best choice for you. This type of savings account combines the feature of a basic savings account and checking account together.
How does the savings account yield higher interest rates?
The minimum deposit is higher compared to the usual savings accounts. This makes it easier for the bank to divide the interest rates for both the savings and checking account of the account holder.
Three: Certificate of Deposit Account
This form of savings account is also known as a time deposit. This means that your money will be left untouched and unspent for a specific span of time. During this time, the bank will use the money for their investments, and depending on the span of time that you allow your money to be used, the interest rate of earning your savings would receive shall be calculated accordingly.
Both traditional and online banks offer this particular type of savings account.
Remember that during the time when your savings is enrolled under the certificate of deposit account, you are not going to be able to access your funds for use. However, if in cases when emergencies arise and you really need to access your money, you can do so, but the bank will charge you the early withdrawal penalty.
To avoid massive charges on your savings, you might want to enroll in several certificates of deposit accounts. This means that only a percentage of your savings will be under the Certificate of Deposit account. This approach will make it easier for you to access your funds without touching your fund under a time deposit account.
Four: Cash-Management Account
If you are aiming to prepare for your retirement early on in life, you may want to subject your funds to a cash-management account. This is not a savings account.
Instead, this system requires that you subject a part of your savings and subject it to a particular form of investment in brokerage.
This is a program often offered by online banks. The mobility of the applications that are used to track the growth of your invested money makes this form of investment based on savings accounts more interesting and appealing to young adults.
When enrolling on this type of account, be sure to ask your bank about the primary features that are included in the basic savings and checking accounts.
The best factor in this form of the cash management process is that everything is automated and can be done on the go. While you earn, you can engage with regular banking activities that you can accomplish when handling a regular savings account.
Five: Specialty Savings Account
If you have very specific earning goals, you may want to check the possibility of enrolling your funds under a specialty savings account. There are different types of specialty savings accounts that both physical and online banks offer.
Some of these accounts include kid’s savings accounts, student savings accounts, and home down payment savings accounts. The interest rate that will be earned by your funds will be based on the goals connected to the account you enroll your funds into. Mostly, all these types of specialty savings accounts are subjected to security investments designed to protect account holders in cases of emergencies.
Why Opt for Multiple Savings Account
Recent developments in banking show how beneficial it is for one to enroll his funds into several types of savings accounts. This way, more possible ways of earning from your saved funds could be achieved.
If you have enough resources of funding, achieving better earnings from multiple savings accounts could be a good choice for you to consider.
Young adults who are mindful of their future and are already earning their own money now are encouraged to save early on in life. This will make it easier for you to manage your savings later on in life.
Banking and savings are distinct financial management systems offered to basic consumers to business owners and other investors to help them manage their cash flow while also giving them a chance to earn from the hard-earned money that they enroll in certain types of savings accounts.
If you have several sources of financing, it is best to check the possibility of enrolling in multiple savings accounts. This will make it easier for you to earn from your savings and receive high-yielding interest rates that you can best benefit from. This way, not only are you protecting your financial resources at present, but you will also earn for the protection of your future and the possibility of going through emergencies in life.