Saving accounts are very popular among people who bank on a retail level- why not! However, behind the popular name, you need to know what it means, the types of savings accounts and its pros & cons.
An adult is required to own at least one bank account to deposit and keep their funds safe because at one point or the other, keeping your money safe whether from what you earn or money you plan on spending on a project in the future becomes a necessity and simply putting it under your mattress is not an option to consider.
Savings account is undeniably the most common type of account and probably the first account most pre-adults operate. Savings account is a deposit bank account that keeps your money safe and in turn you earn interests on your deposit. It is an interest bearing deposit account held at a bank that provides interest rate. Your money is safe and kept away to keep you from unnecessary spending but it will still be available and accessible when you need it.
We are familiar with the two basic accounts banks offer; savings account and current account. We have heard the savings account so often but do we know what a savings account is?
Before you plan out how to save your funds in a bank account or invest your money, you should have at least basic knowledge of the types of savings accounts a bank offers, how they work and which plan would be beneficial to you and your goals. This is very important. This will help you come to the right decision on how best to keep your money
TYPES OF SAVINGS ACCOUNTS
- Regular savings account: It is easier to operate and maintain a regular savings account although it requires that you have a higher minimum balance in your account and its interest rates are low. Regular savings account is offered at nearly all the banks. One advantage of this type of account is that you can operate or make transactions in person or over the counter, on the phone or online.
- Money market accounts: This type of account is mostly for investors who are interested in a fixed deposit and looking to earn higher interest from investments. Money Market Accounts are risks free and regarded as the safest place to save and invest your money. Depending on your bank, the minimum balance you are required to deposit into this account may be higher than the Regular Savings Accounts and will also yield higher interest. There are no limits on how many withdrawals you can make in a month from this account and you can access your account with ease.
- Certificates of Deposit:Certificates of Deposit is quite a popular type of savings which simply involves saving certificates that allows individuals receive interest from time to time. Certificates of deposits have maturity that can range from just one month to five years. The longer the terms, the higher interest rates you earn. Although you will have restrictions on when to withdraw and if you do withdraw before maturity, you are likely to be charged a penalty fee. Customers can have the option of taking interest in advance depending on what your bank has to offer.
- Automatic savings plan: Banks offer Automatic savings plans where funds are transferred from your checking accounts into your savings accounts. This plan is suitable for individuals who find it hard to save money or people who tend to spend more than they actually save. You can choose how much to transfer into this account and the period of time you want it transferred in automatic savings plan. This option is perfect because it encourages saving. Also, your savings account grow monthly with interest
Pros of a savings account
- The most common advantage of a savings account is that your deposited funds earn interest overtime. The more you save, the more you earn.
- They are easy to open. No hassles, in just a few minutes you are done. You can open in person, online or even over the phone.
- The process of opening a savings account is easy and not much is required. Proof of address, a means of identification and a copy of utility bills
- It is easy to access. This has been made possible with online banking you can have access to your money any time, 24 hours a day from where ever you are as long as you have internet connection
- It is a secure way to save money and requires low investments amount to operate.
Cons of a savings account
Like they say, everything that has an advantage must have a disadvantage. After all that has been said about the savings account, there are however, a few clogs in operating a savings account
- The temptation to make withdrawals from this account is usually on the high side because of the quick and easy access to your savings. This can make saving for long term goals really frustrating and difficult to achieve.
- Compared to other types of bank accounts, savings accounts have the lowest interest rates.
- Most have minimum balance requirements which sometimes are on the high side.
- Although it is easily accessible and easy to withdraw funds, you cannot make more than 3 withdrawals from your savings account in a month unless you lose the interest on your deposit
What’s the next step?
Read this to learn HOW TO OPEN A SAVINGS ACCOUNT ONLINE IN NIGERIA