According to a new survey, approximately 26% of adults have no savings set aside for emergencies while another 36% have yet to start putting away money for their retirement. But sometimes, life happens. We are frequently faced with unexpected expenses, ranging from a traffic ticket to medical bills. Using a savings account is the easiest and least expensive way for many families to cover these expenses.
Here is a list of reasons why you should open a savings account today.
Start Building Wealth: A savings account is a stepping stone to your future finances and freedom. Every dollar you save is like adding a brick to the path of your financial success. What's even better? Over time, as your money sits in your account, it will continue to earn interest, allowing your money to work for you.
Easy Accessibility: Are you in need of quick access to your money? Then a saving account is for you. Many people tend to keep their spare change and dollar bills at home in a jar tucked under their bed or hidden in a sock drawer. This is dangerous in the sense this money could get stolen from your home. When you put your cash in an account at your financial institution, not only is it safe, it is readily accessible, and you can make withdrawals at any time you want or need.
Helps with Unexpected Expenses: Life happens. We all know it can be completely unexpected. Sometimes it throws us a huge curveball and you need to be prepared for the pitch. When the unexpected happens, such as your car breaking down, losing your job, or getting sick, you need money easily available to help with these unexpected events. There's no better place to turn to for help than a savings account. It can serve as an emergency fund for any situation. Plan to set aside three to six months' worth of your income for these types of crises. Be aware and prepared.
Cheaper Than Borrowing: If you chose not to start a savings account and the unexpected happens, the other alternative is borrowing money. Unfortunately, this can be costly. According to Mark Kantrowitz, an expert on student aid, "If you were to save $200 a month for 10 years at 6.8 percent interest on average, you'd accumulate a total of $34,433. If, instead of saving this amount, you were to borrow it and pay it back monthly over 10 years at 6.8 percent interest, you'd pay $396 a month, almost twice as much." Long story short, it's cheaper to save than to borrow.
Pay for College: Did you know, student loan debt is now the second highest consumer debt category, behind only mortgage debt, and higher than both credit cards and auto loans? According to Forbes, there are more than 44 million borrowers with $1.3 trillion in student loan debt in the U.S. alone. The average student in the Class of 2016 has $37,172 in student loan debt! What's even more troubling? Many parents are still paying off their own student loans from when they went to school, and now their kids are going off to college. In addition, FinAid.org reported that the cost of tuition could be more than three times the cost it is today by the time today's newborns go to college. That is why a college savings plan is a must; it is a tax-advantaged way of saving for college.
Out of Sight, Out of Mind: Trying to avoid spending all your income? Put it aside in a savings account before you have that chance. One good idea is separating your savings account so that it is not linked to your checking account. Out of sight, out of mind.
Open a savings account today. Then, begin to have a portion of your paycheck automatically deposited into it. Even a little savings will add up in no time. By following these guidelines, you will be taking the necessary steps towards becoming financially stable and successful.