This is a contributed post and do not necessarily reflect the opinions of Meet The Harris Family.
Savings accounts have always been looked at as the ultimate way to save money. I mean, the clue is in the name, right? Why call something a savings account if it’s not a great way of saving money, it just won’t make sense!
As a result, we have lots of people heading to their local banks and stating that they want to open a savings account. It’s one of those things that’s seen as a wholly positive decision where nothing can possibly go wrong.
However, what if I told you that you may want to think twice before opening a savings account of your own?
Why? Because in a lot of ways, they’re not all they’re cracked up to be. I know that’s quite vague, but allow me to explain things in this blog post. In my eyes, there are a few aspects of savings accounts you should think about before you go to the effort of opening one.
You Barely Make Any Money
One of the key drawbacks with savings accounts is that you barely make any money out of them. This is because interest rates on most savings accounts are really bad. You make a few pennies every year, maybe more if you’re lucky. Therefore, if you don’t have a great deal of money in your account, then it’s essentially pointless.
Some people will come back with the argument that they don’t create a savings account to make money, they just want somewhere to save their money. To this I say; fair enough, but there are potentially better and more effective ways of using your money. These days, there are loads of things you can invest in without spending a great deal of cash. A great example of this would be silver. This is is a precious metal, and you can find it at LPM where you can buy different types of silver. It doesn’t cost a lot, and you end up with a physical asset. Now, you’ve got something that’s worth money, and in a few years time, it could be worth way more than what you paid for. So, when you sell it, you earn a profit. In many ways, this is another way of saving money. The money is tied up in a physical asset – so it can’t be used – but the difference is that you increase the value of your money, earning a profit.
My point is that savings accounts are very one-dimensional and there are other ways of ‘saving’ your money while ensuring it grows in value at the same time. Silver isn’t the only example, think about investing in steady stocks and shares to get the same effect as well.
There Are Often Fees Attached
It’s incredible how many people are unaware that savings accounts often come with additional fees. Normally, they’re free to open, but some banks charge fees if you don’t have a certain amount of money in the account, or as a maintenance fee.
Obviously, when you’re trying to save money, you don’t want to pay for your savings account. It’s a needless way of eating away at your money and ensuring you don’t save as much as you intended. Some people compensate for fees by depositing more money in their savings account, but this could potentially leave you with less disposable income, making it harder for you to live a comfortable life. As a result, you stop putting lots of money in your savings account, which may lead to the fees coming back – it’s a terrible cycle to end up in!
The clear thing here is to ensure your savings account has no additional fees before you open it. The last thing you want is to be hit with extra charges that you weren’t aware of until it’s too late.
Should You Open A Savings Account?
It probably seems like my intention is to scare everyone off savings accounts for life. However, this couldn’t be further from the truth. All I want is to make you more aware of what you get from a savings account. There are two very big points here that show savings accounts in a different light to what you may be used to. This begs the question; should you open a savings account?
The answer is both yes and no, but it depends on different factors:
Yes
You should open a savings account if you’re just looking for an easy way of setting aside some money every month. For me, the best way of using these accounts is by setting up a monthly direct debit to ensure you’re putting away some cash every month and not spending it. Essentially, the money in your savings account becomes an emergency fund of sorts. It’s there when you need it, and can be transferred to your regular account if a financial emergency presents itself.
You’re not looking to use this account as a way of earning a profit and growing your finances. In fact, you may already have money tied up in investments alongside your savings account. As such, you can use one as an emergency fund to help limit spending and create a financial safety net.
No
Having said that, if you’re using a savings account because you want to deposit a lump sum of money and leave it there for years, then you’re just going to end up disappointed. Don’t open one if you’re keen on growing your wealth, look at other investment opportunities instead. The interest rates on savings accounts are simply not good enough to warrant leaving a lump sum of money there and praying it grows substantially over time.
To sum up; savings accounts can be good when you use them for the right purpose. Just make sure you open one with no additional fees! If you’re thinking about opening one because you want to invest your money and earn a good return, then think again. It should really only be used alongside your investments as a way of saving money every month.
