Every worker, every individual who receives money from family and friends, and everyone who has a source of income; large or small, is encouraged to save. Why?
Defined as income not spent, savings is the amount of money kept away by earners and are not spending, expected to be used for future purchases and different emergencies that may happen. Individuals who opt to save some of their earnings often say that this amount of money would be used to assure them of a more stable future.
Understanding the Process of Savings
There are different ways to keep one’s savings safe.
While keeping your money inside a piggy bank at home is considered a good way of saving, it is not considered effective. Financial agencies that were established in the face of handling the money issues during the great depression have found it necessary to encourage people to save money- to not spend everything that they earn at work and be able to keep something for future use.
To centralize the system of household savings, the creation of banks and other financial agencies have made it possible for such saved money to be used back and be included in the general flow of money in the society to support economic developments in the communities.
Banks have created programs and systems that are designed to motivate households and individuals to save. The system follows a process by which the money saved by an individual savings account is reused to support other social investments that are designed to improve the general condition by which the society is aided. As a form of “reward” for the savings accounts holders for letting the bank use their money, the money they saved is allowed to earn a specific rate of interest monthly, quarterly, or yearly, depending on the type of savings account a person enrolls his money into.
Understanding the Context of Interest Rates
Among any other form of financial savings programs offered to members of the society who are interested in keeping the money they earn for future use, interest is a common factor that is assumed to be the motivating element used by banks to send as a come on to prospected clients.
According to the clauses of classic economics, the interest rates were not merely created to serve as a come-on for individuals who are interested in saving the money that they earn. This factor was made to create a correlative equation that connects cash flow inventories and makes money more usable based on multiple investments.
In a simpler explanation, financial logic suggests that as savings rise, the interest rate falls. Nonetheless, the more savings there are the more individuals and agencies would stimulate a rise in investment. In a statement of equalization, the higher the savings the more individuals and organizations would be willing to embrace the concept of investment.
In a way, interest rates protect the general source of cash flow and allow for different financial systems to fuel the structure of the economy.
This is, however, a bigger concept of the overall picture of savings and earning interest rates.
On a smaller and more direct context on how the meaning of interest could affect you personally understand your personal financial standing. Deciding on what to do with the money you earn today is critical to the path that your life is going to take and how much impact your present earnings is going to affect your future living conditions.
From Passbook to ATM to Online Savings: The Evolution of Personal Banking
For a clarified definition of what savings accounts are, these are savings programs that are offered by retail banks. Among the features offered to owners of savings accounts include a limited number of withdrawals allowed in a day, no cheque, and credit cards are immediately linked to this account. Back when savings accounts were still being introduced to society, the records of transactions are recorded on passbook savings accounts. No bank statements were provided then.
This means that considering the traditional process of keeping a savings account, it could be noted that tracking one’s savings status requires that a person go to the bank to have everything checked and printed into the passbook.
Later, the creation of ATMs or Automated Teller Machine was introduced and checking, deposit, and withdrawals on savings accounts could already be done anywhere there is an ATM machine available. This change made banking and owning a savings account even more convenient for the savings accounts owners.
The prototype ATM machines were created in 1968 in Scotland by Barclay’s Bank of Scotland. In 1969, an improved machine was developed from the prototype and was installed in Sydney Australia. Shortly after, within the same year, another type of ATM machine was created and used in Spain, which was created by Asea Metior’s Bacomat.
The machine closest to the ATM machines used today are patterned from what Donald Wetzel from the US made. From automated baggage handling to automated gasoline pumps, Wetzel was able to create effective money dispensing machine that gives out more than what its prototypes have provided both in Sydney and Spain at the time.
In 1969, convenient any-time banking was born in Rockville Centre, New York. The ATM worked as a networked connection between not one, but several banks that allowed financial sourcing from different banks depending on the savings account holders who use the ATM. Later, in 1974, a recession happened and the use of ATMs has dramatically lost its market appeal. During this time, companies like IBM made it a point to make use of the time to improve whatever system is present and is being used in ATMs and make it even more accessible and trustworthy in preparation for the end of the recession.
In 1979, networked banks have become a common culture that fueled the development of high-end ATM utilization that offered more than just deposits and withdrawals. At the same time, the cap on the amount of money withdrawn has also increased. Banks have made this certain to improve the point of convenience and improve the rate of user experience.
Developments on personal banking since this point is now focused more on improving the convenience of the users- primarily highlighting the capacity to access money fast in real-time.
The introduction of the internet has certainly revolutionized the way banking agencies handled their responsibilities. Instead of merely making use of machines to dispense money to savings accounts holders, the internet offered a more sophisticated manner of managing savings accounts and improving the concept of pursuing cashless transactions among users and networked banks around the globe.
This has given way to the development and progressive improvement of handling features and financial operations concerning savings accounts and brought on the possibility of accomplishing financial operations and transactions online.
How Did Online Savings Change Global Banking?
“Online Savings Accounts” or “OSA’s” are often characterized based on higher interest rates or in a way, lower fees. This is based on a comparison of online saving accounts and traditional savings accounts. Online saving accounts are usually considered high-yield accounts because of their higher interest rates, lower fees, and they have no minimum balance.
Online saving accounts can actually be linked with external savings or checking accounts to make transferring, withdrawing, and depositing way more convenient. Online programs or firms also provide physical debit or ATM cards so that you can access your funds a little easier.
Let us first examine some of the downsides of online savings. The thing is, most online savings account services don’t have a physical branch. Because of this, there is no way a savings accounts holder would be able to go to a physical bank to personally check on his accounts or be able to personally talk to a teller or bank personnel when certain issues occur. While support chats and email communication are available, there are instances when the whole website is down and resolving issues may not be possible, until the bank’s website comes back up.
For this reason, there are a lot of individuals who feel adamant about opening online savings accounts for fear that when issues arise, there would be no available physical personnel who would respond to the issues. Because of this, they also fear that they would lose their money just like that in case anything goes wrong online.
Another thing to consider is that depositing funds to an OSA doesn’t work with basic savings accounts, depositing money into it usually requires “ACH” or “Automated Clearing House” procedures to do just that. Sometimes, mailing in a check to a bank or depositing the money directly via a physical bank branch is the method used by many people who have online saving accounts. So the depositing and withdrawal process is a little bit more complicated compared to the traditional process associated with basic savings accounts.
Now let’s take a look at the effect of Online saving accounts on the overall state of “Global Banking”.
Online Savings and Global Banking
Since 2005 when online saving accounts started becoming way bigger in popularity, it has been estimated that the OSA market could potentially triple in its size. It was estimated that in 5 years, the size of the OSA market could go from having a total of 250$ billion to a total of 400$ billion.
Online saving accounts associated with rising interest rates have provided many investors with a low-risk option. Online saving accounts provide investors with a place to store their savings to avoid the effects of inflation and the uncertainties of economic times. Inflation has affected the global banking scene largely along with stagflation. Online saving accounts have also affected the global banking world in a big way.
Online saving accounts have started to become extremely common since their rise in the early 2000s. Now, a lot of people have opened their very own online savings account so that they can closely monitor their funds, make deposits more convenient, make withdrawing money easier, and making the overall savings process much simpler.
This has basically led to more than 8 million people signing up for or register for their own savings account. This made the number of people who have traditional savings accounts a tad bit lesser. With the extreme increase of options for people looking to start saving, the amount of people going for the more convenient and mobile option of banking has made the number of people choosing traditional banking much lesser.
Traditional Saving Vs Online Based Savings
Traditional savings still is a go-to for many experienced and veteran investors and savers. But when it comes to newbies, managing and opening your savings account with your mobile laptop or phone is the more appealing option. The concept of increased convenience plays a critical role in the process of deciding whether to choose an offline or online-based savings account.
Because of the big difference between OSA’s and traditional saving accounts with banks, OSA’s pay higher interest rates and charge you relatively lower fees. Traditional saving methods usually cost you more to maintain your accounts and you get charged with higher fees compared to online savings accounts. This is a usual form of motivation that online banks use to get the attention of those who are still about to create their savings account and are considering going online instead of having to visit physical banks to open their accounts.
OSA’s are usually completely digital but the law requires them to have the same regulations and rules similar to traditional banking. Online saving accounts can be operated fully online, but like traditional banks and institutions, the withdrawal limitations put the max number of times you can withdraw from your account at 6 per month based on the “Federal Reserve”.
So technically speaking, online savings accounts have many benefits and they have largely affected the world of global banking. OSA’s could potentially shape the global banking of the future. There are a lot of benefits to saving your money online. It is simpler, can be done on your mobile phone, thus making it a more convenient option of managing your finances. OSA’s provide you with more opportunities and lets you be more mobile in terms of managing your funds anytime and anywhere you like.
Online savings accounts could potentially be the most common and popular way of saving money in the next five years or so. So if you are considering whether or not you should open your own OSA, don’t overthink it too much, just weight the upsides and downsides before you make a decision.
Primary Conveniences of Online Savings Accounts
Many people choose to save their money online because of the convenience it brings to them. Having a savings account you can maintain fully online is very appealing to many customers. With online savings, you can withdraw and deposit money from and to your account all on your mobile smartphone or your trusty laptop.
Online savings aren’t just convenient too, according to many statistics and observations. It is possible that in the near future, online savings could potentially be new to banks and save. It was estimated that in 5 years alone from 2005 to 2010 that the online savings market could potentially double, even triple in its size, and go from 250$ billion to 400$ billion in that short amount of time.
Let’s take a peek at the rest of the conveniences you experience when you have an online savings account.
ONE: You Have Full Mobile Control On Your Account
With online savings, you can monitor and check on your funds regularly with a single tap thanks to mobile apps and/or websites. This is a very convenient feature if you need regular access to your funds. With an online savings account, you can make deposits and withdrawals easily without having to go through too much trouble.
You can also monitor your savings anytime and anywhere thanks to its mobility. If you have a phone or any mobile device and an internet connection, you can easily check on your savings and take action with it wherever you are. This is especially handy if you’re someone who travels a lot due to your work.
Many people don’t like adding a slot in their schedule to go to the bank and wait in line for hours just to deposit money or check on your savings account. This makes online savings account a much better option for people who are generally busy and don’t have much space left on their schedules for bank appointments. With online savings, you can avoid the hassle of going to the bank early, waiting for it to open, and waiting in line for long periods of time.
TWO: Withdrawing and Depositing is Made Easier
With online savings accounts, you can withdraw and deposit money much faster. As long as you have the mobile app or have access to the bank or financial institution’s website, you’re pretty much good to go. Many banks, firms, and institutions have online options to make your savings and banking life much easier and much more convenient.
Especially in today’s world, everything is pretty much accomplished online. Shopping, ordering food, and saving your money can all be done on your phone or whatever gadget you use.
Since your savings can be viewed completely digitally, you can practically keep an eye on your money whenever and wherever.
THREE: Online Savings Account Provide a Much Safer Option for Investors
Traditional banking and saving are still some of the most popular go-to’s for many investors alike. Its convenience in maintenance and monitoring makes it a very good option for businessmen.
Online Savings have also been proven to be safe, secure, and reliable when it comes to protecting and safeguarding your money. This is a big aspect when it comes to investors who are looking for an appropriate place to park their money for short-term or long-term goals.
FOUR: There’s Not Much Difference between Online Savings and Traditional Savings
Online savings is pretty much traditional savings that are done mainly online. Online savings provide you with a debit or ATM card that you can use for withdrawals and deposits just like traditional savings.
FIVE: Fees and Balances
Compared to traditional savings, online savings have a much lesser interest rate, minimum balance, and don’t charge you with fees a lot. This is one of the reasons for the popularity of online savings compared to traditional savings.
Ever since online savings became a thing and risen and popularity, the lesser people came to banks or institutions to open traditional savings account because just about everyone already has a savings account, and it’s all in their pockets or backpacks. Online savings provide many benefits and conveniences when it comes to saving your money efficiently and safely. Online savings provide you with many opportunities and give you full control and access to your saved funds.
Real-Time Tracking Spells Real-time Convenience
To offset the idea of not having the full capacity of managing your money through a physical bank, online banking systems are offering real-time updates that make it easier for online savings accounts holders to track their transactions as well as transfer funds whenever they want to.
As in Automated Teller Machines or ATMs, the name of the game is convenience.
In the beginning, online savings accounts are only capable of providing features that are common to physical offline savings accounts.
However, studying through the different needs and demands of users, the year 2012 has created a new form of meaning to the definition of online savings accounts. Instead of just saving money and withdrawing money from the account, banks have made it possible for online savings accounts holder to have more power in the process of using their savings accounts to accomplish other critical financial transactions.
One of which is being able to track transactions online with real-time updates. For instance, if a person, perhaps your employer, decides to send your salary directly to your online savings accounts, it will take only a few minutes for the funds to be available in your account which you can track immediately on time. This basically gives online savings accounts holder to feel the power and the capacity to control their accounts online.
Unlike in the traditional banking system, a savings accounts holder needs to wait for the operational hours of the bank to get the necessary update that they need. Now, even in the dead of night, such transaction updates can be tracked. This is especially convenient for those who use their online savings account to receive and send money from different parts of the world where time difference takes a critical part in determining the processing of funds. Online banking breaks the inconvenience brought about by the off-hours of operations. Operating 24/7, anyone who has access to the savings account and its details and pin can readily receive updates whenever changes happen in the account.
More than Just for Savings
Ecommerce is one of the driving forces behind the development of a more effective way of managing finances online.
Ecommerce is the process of accomplishing commercial transactions online. Among these operations include selling products and services online. For a person to be specifically gain access to these products and services, they would need to choose COD (cash on delivery) or accomplishing payments online. However, a person who wants to be given access to these products will determine the rate of convenience that they get from their transactions online.
Through time, the issues on not getting paid, on the part of the sellers became evident. This did not present the good news to those who want to engage in online selling. This is what online financial agencies intended to resolve through offering payment services for those who have active online savings accounts.
With one click, individuals who want to purchase products online can already confirm their orders, and sellers are assured of the payment which may include the shipping fee for the products to be delivered right at their buyer’s doorstep.
Another driving force that empowered the development of stronger and more functional online savings accounts include the emergence of higher rates of individuals who work remotely from home. Freelancing and engaging in online work gigs have become a common culture especially among individuals who have soft skills- or skills that are usually required of people who take office-based work opportunities.
From web developers to accountants, to legal aids, to writers and designers, to other forms of work accomplished online, people who have something to offer online are now opting to work and connect with their employers online. With everything done and accomplished online, remote workers and their employers often opt to use online money transfer as an option to pay for services and salaries. Besides being convenient, this option of sending and receiving money online gives both parties the trust that they need from each other in order to resolve the financial factor that serves to connect them.
Besides paying for products and services as well as receiving and sending money for payment of services and salaries, online savings accounts also allow holders to opt for online investment policies.
Online investment policies are considered to be one of the most effective ways of earning residual income these days. From investing in stocks to investing in other financial policies that are much safer and less risky than bonds, online savings accounts holders are now given the option to link their account with their investments, therefore automating everything. This option allows account holders to just enroll in the investment and let the transactions happen automatically from that point onwards. This leaves the connection of the account holder to his investments much easier to manage to avoid missed payments which will keep him updated and capable of receiving incentives continuously.
Again, in terms of investment, the capacity of the savings accounts holder and investor to track everything on a real-time basis is critical to the trust that is being built between individuals and the banks that offer online savings accounts policies.
Protecting Your Savings Online
If you are among those who feel that opening an online savings account is a good choice for you but are still having some doubts about it, it may help to know how your online savings are protected.
The truth is, when it comes to protecting your savings account, the process takes two parts of the party. One is the protection that the bank is legally required to provide, and two is the alertness and knowledge that online savings accounts holders have in terms of protecting their money. In short, you too have a take on how much your savings is going to be protected.
Be alert and aware of where or what services you are linking your savings account to. Most often than not, eCommerce business owners ask for details of your account before they agree for you to choose what service or product you are going to purchase. Often, these prompts are automated. Hence, when it comes to providing your details, you need to be more cautious.
Hackers and malicious online users are present and they often affect the general manner by which individuals decide on whether they are going to open an online savings account or not. Hence, when deciding which online bank to open your account with, do not be afraid to search and ask. If you can connect with the management through a message, you do so and ask questions that you think may help you in your decision.
Everything that is offered through technology has its own pros and cons and this does not put online banking as an exception.
So, being a responsible individual, you need to research deeper and read through the system of online savings program an online bank offers. In the long run, the benefit that you will get from having an online savings account will largely depend on how much work and effort you put into the process of assuring the safety of your money as a partner and client of the bank to whom you entrust your savings with.