Using a Savings Account in Different Ways

There can be a lot of confusion around money and savings these days, when sometimes all you need a savings account. It is well worth shopping around for the best deal as banks will compete for your business, offering sign-up bonuses or special rates to new clients. Cash incentives can mean a great deal to prospective new account holders, and are free money at the end of the day.  

New Client Incentives

The financial industry is large and competitive, with big banks competing for clients all the time. Most banks offer a rewards and incentives for doing business with them. Even something as basic as a Money Market Savings Account (MMA) can come with bonus cash or better interest rates on your savings. TD Bank and Discover Bank currently have active deals:

  • $200 with TD Bank - TD Bank is currently offering $200 in free cash when you sign up for either their popular TD Simple Savings account, or their TD Beyond Savings account.  This offer is only good until June 30th, 2022, so don't delay if you're looking for some extra cash free.
  • $200 with Discover Bank - Discover is offering up to $200 in free cash when you sign up for a Discover Onilne Savings Account.  It's closing soon though, so hurry in before May 15th, 2022 to take advantage of the free cash.

Benefits of Savings Accounts

There’s a lot to like when it comes to savings accounts. They are arguably the best way to save for mild to moderate purchases. Savings accounts are best when used in conjunction with a checking account. Checking account is used day to day, and savings accounts just receive deposits until you reach your savings goal. Some of the benefits of a savings account include: 

  • Offer Interest: The savings account will offer interest on the money within the account. This helps you grow your money. 
  • Simple: There’s not a lot of confusion, jargon or hidden aspects to a savings account. You put money in, earn some interest on it, and then take it out when you’ve saved enough. 
  • Potential Tax Savings: many savings accounts are actually tax free. Money that is made from them is excluded from income tax. This can sometimes even include investments. It’s best to look into the details of each individual account to determine just what the potentiadl tax benefits may be. 
  • Help Support Budgeting: Savings accounts are a great choice for anyone who is trying to stick to a budget. They know exactly how much of their paycheck is intended to be set aside each month, and it can go directly into the savings account. There’s less temptation to dip into these funds. m
  • Good to Learn From: A savings account is often a great way to teach children about banks, banking and finance. A savings account will allow them to start saving away money, which they can eventually use. It may be tempting to teach them about things like Apple Pay or other modern conveniences, but those can easily be accidentally misused. 

Disadvantages of Savings Accounts: 

While there are advantages, there are also obvious disadvantages with savings accounts as well. Some of the less beneficial things include: 

  • High Transaction Fees - In many cases, withdrawing money from a savings account will come with a relatively high transaction fee. Since this is not intended to be done often, it’s understandable, but could be better. Often these fees are waived if it’s an online only savings account. 
  • Interest Rates Tend to be Disappointing - When it comes to savings accounts, interest rates aren’t fixed and can be altered by the bank at any time. They don’t often add up to too much and rarely meet the levels of inflation. This means savings accounts are better suited for moderate purchases. Saving for a vacation, home renovation or other mid-tier purchase. They aren’t for building wealth for retirement. 

Using a Savings Account Correctly

The best uses of a savings account have already been touched on in this article. They are perfect for budgeting. Budgeting can be difficult for some people, however, when you budget to save, it’s better to separate that money from your checking account, else you’ll be tempted to use it. This is perfect for savings accounts. 

Savings accounts can be an excellent learning tool for children as they learn about money and responsibility. Savings accounts can let them see that it’s possible to grow their money by saving and avoiding spending. Many savings accounts are designed for kids with limits on withdrawals and some extra parental controls and notifications. 

Savings accounts are great for moderate purchases. Anyone who wants to save up for a vacation or similar purchase can set an alert on a savings account. Once they reach their goal, they’ll be notified through online banking. It’s likely that anyone using the account will probably have stayed up to date on the balance anyway, but sometimes “forgetting” about the savings account is a good way to avoid the temptation of spending your savings prematurely and impulsively. 

Really, there’s a lot of reasons a savings account can make sense for people. It’s important to simply make sure that the reasons you’re using the account make sense for your own situation. 

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