What is the point of a savings account?

NecrosaroIII

NecrosaroIII

Banned
My wife has been telling me to open a savings account... Frankly, I just don't see the point. The interest rates are so low. Like 0.01%. While technically you can raise like 1 dollar a year passively, that is negliable cash. It seems like it's a pain in the ass to pull from that account. I'm pretty good at budgetting, so I don't know why I shouldn't just leave all the cash in one account.
 
Credit Unions, breh.

I have like 1.5% APY on mine.

Also recommend keeping your savings account in a separate union or bank than your main so you're not tempted to dip into it.

Another alternative is staking a solid crypto (like Cardano or something) or keeping it all in varied mutual funds / bonds.
 
They're a relic of a bygone era but I guess it's helpful for some people to isolate their money in a different account, even if it's not earning anything.

Personally I keep my "savings" in a high dividend ETF. It's relatively stable in terms of share price and the dividends are way more than a savings account pays.
 
You could put the money in a savings mutual account that will generate some return but also carries some risk.
I have savings accounts for emergencies and vacations.

If I didn't move money out of checking my wife would spend it.

Having a savings account is planning for the future. Being prepared for what may come or executing plans that you have. I keeps you from living paycheck to paycheck.
 
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You can get better rates from other vehicles that are also FDIC insured.

As a reminder, FDIC limits are 250k per bank per person/ownership scenario.

Can't give actual recommendations because I am a Financial Advisor and it would be a violation, but you can do your own research to find a rate at a bank or union that works for you.
 
I have one but it's strictly an emergency fund. It's technically in a "high interest" account, but those are really low nowadays. So I feed it to account for loss due to inflation. Could I have it in a short term bond etf/index? Sure but I want my emergency fund to be completely isolated from any market influences and my monthly deposits to make up for inflation are basically a maintenance fee.

Then everything else I have in my IRAs,HSA, 401K, and my taxable brokerage.
 
If you need to temporarily park some cash (but need it separate from checking), its a decent enough idea.

But yeah, don't sit on TOO much cash as it wont be working for you.
 
Part of saving. At least here is to build a credit history for when it comes to borrow in the future. That and for a rainy day etc. The interest here really is neglible unless you have a decent amount built up in which case it can cover additional expenses and the like with the interest but smaller savings account are rainy day / credit building ideals really.
 
Put all of your money into the market --> market crashes and your job goes under ---> worst possible time to liquidate your stocks, but most likely time you'll need to liquidate your stocks.

Savings account is for your emergency fund.
 
One type of account that is often overlooked is a money market account. Typically offers substantially higher rates than a big bank (still below 1% in today's environment) and is FDIC insured. You give up a little liquidity as you are limited in how many transactions you can make in a month and other limitations. Limitations are typically there to make sure the account isn't used as a checking account with a different name.
 
1. Separate your bulk of money from your checking account, so if it's compromised they can only exhaust what's in there. Most people tend to auto-pay bills and what not from checking, and debit cards are almost always defaulted to withdraw from checking, after all

2. Savings accounts and money market accounts, particularly at credit unions, have much greater APY's. It sounds like you do not have a good bank in that respect

3. One doesn't want to keep all of their money in the market and their retirement accounts ( 401(K), 403(b), etc). One should always have some liquid funds of some kind, and some emergency money. You don't want to completely lose your shirt if we hit a sudden recession and the market tanks
 
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I have one to segregate my money. I don't want my checking account to have more than $10k in it at any one time unless I'm making a large purchase.
 
I too use one to separate money. I have my bank automatically put 10% of each cheque into savings. This solely money put aside for emergencies.
 
I use mine to separate my cash, I can forget about it there and just focus on what's in my main account. It helps budget as it looks like I have less than I actually do. The saving money becomes quick cash to be used o flipping deals or for emergencies without having to rely on the credit card.
 
QuantumZebra said:
Credit Unions, breh.

I have like 1.5% APY on mine.

Also recommend keeping your savings account in a separate union or bank than your main so you're not tempted to dip into it.

Another alternative is staking a solid crypto (like Cardano or something) or keeping it all in varied mutual funds / bonds.
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Stablecoin Cryptos offer better than that. LIke 5%.
Defi Cryptos can be from 5-15%.
 
Those types of savings accounts are for people with low savings or need to go back and forth fast with other accounts and need a place to park money. With rates basically zero you might as well just ignore it and convert it all to a no fee chequing account.

savings accounts can be good if you go to secondary banks and want to stockpile cash for a rainy day. Mine is at 1% but is variable. It peaked at 2.7% before covid. But when covid happened and rates dropped it plopped down eventually to 1%. It's also good because 100% of the funds are guaranteed whereas most banks have a cap like $100,000. Chances of them going bankrupt and you lose your shirt is low but I got triple digits in cash I can't afford to gamble in the markets as I have a property going up next year and need it for mortgage and final payments.
 
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Open a Goldman Marcus account online. I get 0.5% interest. Probably the best rate you can get now. I use it for my emergency fund. Good to have it in a separate account so I'm not tempted to draw from it.
 
I stopped using mine. It's there just in case, and I can always transfer money to it, but I'm good with just a checking account.
 
HoodWinked said:
There is no point. They kind of exist for people that don't know any better. So banks can have essentially free capital.
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Meh, I like my Marcus account. I just throw 10% into for emergencies ontop of other stuff. But it's also good to use it to target certain travel goals.
 
0.01% interest rate sounds ridiculously low, way lower than I've ever seen in my part of the world. Still, a savings account comes in handy when you have cash that you know you're going to spend soon-ish, making it too risky to invest them. Like if you're saving up for a house.
 
You can get some very good rates on savings account but you'll have to dig into what types and what institutions are offering them.

As for practical reasons, it's been mentioned across the thread but it's the step between sitting in your checking and getting longer term options like CDs, 401ks, IRA, etc. You can earn a bit on your money while still having access to it readily without penalties, etc. As long as you don't have any outrageous conditions to having it, there's really no minus to having a saving account and parking some money in there.
 
NecrosaroIII said:
My wife has been telling me to open a savings account... Frankly, I just don't see the point. The interest rates are so low. Like 0.01%. While technically you can raise like 1 dollar a year passively, that is negliable cash. It seems like it's a pain in the ass to pull from that account. I'm pretty good at budgetting, so I don't know why I shouldn't just leave all the cash in one account.
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OP, I agree with you. I have < $300 on my savings account, and just enough to cover my monthly bills and expenses on the checking account.
I also know how to budget, and 99% of my wealth is invested in a portfolio of assets that I manage personally. If I have an emergency, I use one of my credit cards, which I keep at zero balance all the time.

The banks suffer from a crippling lack of liquidity. For example, try to get $10k out of a bank on a whim, it is impossible; I have had problems in the past even trying to get $5k at once. I would never leave my money with them. I would rather hold stacks of cash in a personal safe, which I did for some months during last year, before giving it to a bank.

Another misconception is that savings accounts help you get a high credit score. My credit score fluctuates between 770-820 and I have never had to demonstrate having any money in a bank. When I go for a loan to purchase a large asset, I only need documented proof of my income and investments.

If you really want a savings account, I recommend Schwab's, which links straight to a brokerage investment account.

 
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Just another avenue of your finances. It's good to have cash, savings, stocks, retirement etc. This way you're covered in any event or method of access/timing required.
 
Life is unpredictable and sometimes you need cash readily available.

Do you invest everything you earn? How do you take money already invested out? Do you sell stocks whatever the price because you need the money? Do you take a loan for things you could afford cash?

These are real questions, as I never use my credit card unless I have no other way to pay/buy something (online etc)
 
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20cent said:
Life is unpredictable and sometimes you need cash readily available.

Do you invest everything you earn? How do you take money already invested out? Do you sell stocks whatever the price because you need the money? Do you take a loan for things you could afford cash?

These are real questions, as I never use my credit card unless I have no other way to pay/buy something (online etc)
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I budget my account so that I can save about 25% of my income. As a result my checking account is decent. I don't invest in stocks because I'm afraid
 
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The last time I looked into savings accounts (UK, if relevant) the interest was absolutely not worth the loss of access or other drawbacks. I'm a big believer in being prepared. I don't even have a yearly SIM in my phone, I can stop that whenever I want. No way I'm going to let my money be tied up in some account that's going to penalise me for getting to it.
 
Just avoid joint accounts at all costs.

The only benefit to a low rate savings account is to minimise damage if someone scammed you or cloned your card.

Isn't it a wonderful world for bankers though - 37% on credit cards, 0% on savings and the banks just borrow / print what the want for free. Saving money has become a scam.
 
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my savings account is 0.01% so i'll be due a grand total of £1.20 soon. actually it'll probably be less than that. could be anywhere between £0.80 + 1.20.

i've looked into other accounts but it's too confusing for me. i only really have a savings account to keep it separate from my account that i get my wages into and use to spend.
 
I have an ISA that I put money into every month. I use it as my emergency fund and holiday savings fund.
 
crazepharmacist said:
no, there has to be more risk for that type of return. You're lending out Bitcoin? So while you're getting 15% annual interest, what happens when Bitcoin's value drops 50%?
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Not bitcoin.

There's several coins. Dai, Algorand, etc etc. Some of them are stable coins (ie pegged to dollar) that give out way better returns than savings.
 
As already stated, your savings account is for your emergency fund and that's it. Keep around 6 or even 12 months of your expenses there and don't worry about interest rates, then you study more and see where you're going to invest.

Also, there's no such a thing as "safe crypto" imo, it's all too new and we don't know where it is going.
 
I find it strange why people go through the management hoops of this and add complexity where it's not needed. people say emergency fund but just keep it all in the checking account. you'll make what like $3 a year by having it in a saving account. It seems like they do this so that you'll fuck up and overdraft and the bank makes money on the fees. In fact saving accounts always seem to have bullshit fees like separate minimums, transfer limits all the fine print isn't worth dealing with and they can change the terms. The saving account that I used to have didn't have fees as long as I had direct deposit but what if I lose my job then forget, that's another fee I would get fucked on also the fact that I went through the hassle of reading the terms in the first place is shit I shouldn't have to deal with.
 
I keep around 20K in my savings account through an online credit union (currently at .55% and was at 2.15% before all the covid stuff) to take care of all my budgeting categories (vacation, rainy day/home repair, extra savings that turns into a full Roth contribution at the beginning of the year, vehicle maintenance, personal wellness/healthcare, etc etc). All of that makes up my emergency fund if the need ever pops up.

My checking is for inflows and outflows (paying credit card, mortgage, car note, etc) only. Everything that I can pay for without fees using a credit card, i will.
 
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