Everyone should have at least one or more savings accounts. The more money you save, the better off you will be in the long run. Most experts agree that savings should be put aside to pay living expenses for no less than three months to six months. Many believe that a years worth of living expenses, in a saving or money market account, would be even better.
In case of an emergency, funds in a savings account should be readily accessible and should be able to be transferred into a checking account quickly or cashed out without time constraints and heavy penalties.
What is a savings account? A savings account is an interest bearing depository account that is set up in a banking institution, banks, savings and loans, credit unions, etc., as a means to save money without binding timetables. Most banks allow savings accounts to be opened with a predetermined minimum deposit.
What are savings account loans? Savings account loans are collateral loans that are secured by the amount of money that a depositor has in his or her account. Savings account loans are relatively risk free for the bank. The bank places a hold on the account at least equal to the amount of the loan and holds the right to garnish the account if the loan is not repaid.
Banks pay interest on deposited funds from the day the account is opened until the day it is closed. The amount of interest paid on money in a savings account depends on the bank and that particular bank's monetary guidelines. The banks guidelines have to adhere to laws and regulations established and implemented by the Federal Reserve System (FED) and savings accounts are backed with Federal Deposit Corporation Insurance (FDIC). The interest rate paid on savings accounts fluctuate depending on the state of the economy.
Although there are several types of savings accounts, the two most widely used are the Statement Savings (Passbook) Account and the Money Market Deposit Account.
•Statement Savings (Passbook) Accounts allow the depositor to make unlimited amounts of deposits and withdrawals. Funds can be transferred to another account that is owned by the depositor, and funds can be withdrawn by mail or at automated teller machines (ATM's).
•Money Market Deposit Accounts allow depositors to make up to six transfers a month using drafts, checks, or debit cards. Like the Statement Savings Account, funds can be withdrawn or transferred to another account that is owned by the depositor.
Shop around for the best rates on savings accounts because each bank is different and they offer different rates and services.