Who Needs a Savings Account?

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Should I even bother with a savings account?

Who Needs a Savings Account?

Savings account rates are not notoriously high. This leads many people to avoid the work put into comparing the rates of savings accounts and just leaving their emergency cash fund in their non-interest-bearing checking accounts. But no matter how low savings account rates are, some growth is better than no growth, so it's still better to deposit your money in a savings account than it is to leave it in a checking account.

Example
Let's say you have $1,000 to deposit in a savings account for emergencies. If you leave that in your non-interest checking account for a year, you'll still have that same $1,000 at the end of 12 months. It's even possible that you'll have less because you're more apt to the spend money that's in your checking account than the funds in your savings account.

Now, if you deposited the $1,000 in a savings account earning 1% interest compounded monthly, you would have an additional $127 by the end of the year. So even though a 1% rate is not high and certainly won't bring you to retirement, it's more growth than no growth.

   

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