Do You Know the Benefits of a Savings Account?
One job of a parent is to teach their children how to save money; often, this involves household chores and a piggy bank. While this is a good primer for instilling good financial habits at a young age, it’s important to continue this financial tutelage as children grow into their teenage and adulthood years. With the right skillset and a clear understanding of finances, young adults have a better chance of reaching their short- and long-term financial goals. Start by selecting the right Savings Account.
It should go without saying that stuffing your money in a sock or hiding it beneath the mattress is foolhardy. These actions leave money on the table that could otherwise be growing in a Savings Account by earning dividends. Not only is applying for a Saving Accounts easy, but they are also low-risk.
Check out the various reasons why you should consider opening a Savings Account:
What’s a Savings Account?
A Savings Account is a financial tool that people use to store money in a bank. A person puts their cash savings in the bank or credit union. Funds on deposit with the financial institution may earn interest called dividends. At Mission Fed, member accounts are insured up to $250,000 by the National Credit Union Administration.
But why do banks and credit unions do this?
- The financial institution receives capital from depositors who want a secured place for their savings. The financial institution incentivizes them to do so by providing interest or dividends on their deposit.
- The financial institution then takes those funds to provide loans to other customers or members.
- This process is repeated over and over again, creating profit for the financial institution over time.
Types of Savings Accounts
Savings Accounts earn dividends on the deposited funds. In addition, you receive an ATM card that allows you to withdraw money from an ATM or bank whenever you need it.
Because banks and credit unions are competing with each other to store your money, they may try and gain your business by providing different perks or types of Savings Accounts that have a higher annual percentage yield (APY). Typically, there are two primary alternatives to your standard savings account, they are:
- Money Market – A larger amount of money is deposited in order to receive a higher APY. A minimum balance must be upheld, or else penalty fees could apply. A Money Market is an ideal type of Savings Account if you plan to keep a larger balance deposited, while having access to make deposits and withdrawals.
- Term Certificates – You put your money away for a fixed period of time, anywhere from a few months to multiple years in exchange for a higher, locked-in APY. If you withdraw your money before maturity you could pay a penalty fee. Keep an eye out for promotional Term Certificates with special offers—like this one from Mission Fed.
Benefits of a Savings Account
- Easy application – Perhaps you are worried that you do not have enough money to open up a Savings Account. Good news for you is that you do not need tens of thousands of dollars to get started as you might with other deposit accounts. In fact, we allow you to open a savings account with as little as $1 for a Standard Savings Account and $20 for a summer or Holiday Saver. Different types of Savings Accounts offer different terms and dividend amount. Determine the account that fits your needs and then apply easily online or at any Mission Fed Branch.
- Links to your Checking Account – These days, most banks or credit unions allow you to link your savings account to your Checking Account, which makes moving funds fast and simple, especially for those who need to transfer money to their Checking Accounts to make up for a low account balance or negative funds. This allows you to prevent shortfalls or overdraft fees that might otherwise occur.
- Automatic deposits – Do you have trouble saving on your own? When you open an account, you can automatically set a weekly or monthly deposit from your Checking Account directly into your savings. Automating your savings helps you build up a windfall or emergency funds with little effort.
- Earning dividends on savings – As mentioned, your money doesn’t become more valuable sitting in your wallet, on your Starbucks card, or in Venmo. In fact, it depreciates over time due to inflation. Even at an APY of 2.00%, earning dividends through a Savings Account is a smarter financial move. Depending on where it’s kept, your money becomes more or less valuable. So, why not keep it in a credit union where your money could gain value, especially when you don’t have to physically do anything for that value to grow?
- Liquidity – The vast majority of Savings Accounts can be accessed whenever, wherever. If you encounter an emergency, simply find an ATM and withdraw the necessary funds. If a larger amount is needed, you can visit a physical location to obtain the money, or transfer the funds by linking your Savings Account to another account. Government regulation restricts certain withdrawals and electronic transfers to six per month.
- Low Risk – A savings account carries low risk. The NCUA insures member accounts up to $250,000 if a federally insured credit union fails. In addition, a Savings Account gives you the ability to use that money with easy access. For example, if you want to put a down payment on a house, you can simply use your savings account funds accordingly.
- Gives you a windfall – Life has its unexpected costs and surprises. A medical bill, a totaled car, these types of unplanned expenses can be financially crippling if you’re not prepared. Having a Savings Account gives you a financial keep to withdraw when the palisades of your financial life have fallen. Such stockpiles could be the difference between a difficult time and bankruptcy. If you find yourself unemployed, it might take time to find new employment. As a safety net, you should have at least 6 months of salary in your savings account.
- Helps you take control of your finances – Saving money isn’t easy, especially for those who weren’t taught how to budget and save from a young age. It takes discipline and sacrifice. Having a savings account helps you follow these wise financial practices. It teaches you how to:
- Establish savings goals
- Set budgets
- Prepare for emergencies
- Live within your means
By creating healthy habits, you turn saving from a chore to a routine. As your savings grows and grows, your financial happiness and security grows alongside it.
- Pay for College – The cost of college continues to skyrocket. Are you financially prepared for it? If not, then the best time to start saving is now. By starting a college savings plan today, you may receive tax benefits and can save your children from needing to take on student loan debt in the future. Make sure to consult a tax advisor about tax benefits. With auto-deposit, you can have the bank take a set amount each month that will go directly into a school savings account.
- Hit short- and long-term goals – Saving aimlessly is not wise financial planning—you always want to have a goal or purpose in mind. Your savings account could be used for:
- Emergency reserves
- Vacation fund
- College savings
- New car money
Whatever your specific goal is, it’s important to plan your savings and budget with a purpose. By opening a Savings Account at Mission Fed, you could seize control of your finances, improve your spending habits and financial security, and accomplish an important task.
America’s Saving Problem
An unfortunate truth is that a significant number of Americans struggle at saving, budgeting, and preparing for the worst-case scenario. While it’s easy to blame financial woes on inadequate wages, a Bankrate Survey illustrates just how few people properly save for a rainy day, regardless of their income level. Bankrate’s January Financial Security Index survey reported the following:
- 30% of respondents reported that either they or an immediate family member experienced at least one major unexpected expense during the past year. Among those respondents, most of the people (36 %) said the largest unexpected bill they received totaled $5,000 or more.
- Only 40% of respondents said that they’d pay an unexpected $1,000 expense, such as a car repair or emergency room visit, from savings. This figure is consistent with previous surveys conducted in the past five years.
- More than 33% would need to borrow money, either via credit card, personal loan, or by some other means.
These figures perfectly illustrate how inadequate many adults’ savings and savings habits are. A financial emergency could happen to anyone at any time. Therefore, it’s critical that you’re prepared for the worst. If you put away just $5,000 then you are doing a better job financially protecting yourself than a plurality of people within the country. This act gives you peace of mind, regardless of the unexpected surprises that life may throw your way.
Applying for a Savings Account with Mission Federal Credit Union
Whether you’re saving for college or a vacation will not take too much of your time. You can apply online or in person. Once you open a Saving Account, it will provide you with:
- Online access to your savings 24/7 via Mission Fed Mobile Banking App
- Mobile deposit
- Competitive interest rates
- No monthly usage fees
You can open up one of three types of savings accounts:
- Standard – Save any amount with a competitive rate
- Summer or Holiday Saver – Aim for a goal with higher rates than standard savings
- Youth – Teach your children under the age of 17 to start saving for their future
To apply for a Mission Fed Savings Account, go online or apply in person at a convenient local Mission Fed branch, or call the Contact Center at 800.500.6328 to begin the process. To start, you will need to provide Mission Fed with the following information:
- Your Social Security Number
- Proof that you work, live, or attend school in San Diego County
- A valid government issued ID or Passport
- A minimum initial deposit:
- $1 for a Standard or Youth Savings Account
- $20-$500 for a Summer or Holiday Saver Account
Starting Your Savings Account
Setting up a Savings Account is a fantastic way to begin preparing for your financial future. It allows you to set goals and benchmarks, while providing you with a barometer for both your present and future financial security. In addition, it safeguards you should any unexpected expenses arise. With the startling number of people currently in debt in the United States, utilizing a savings account could literally change the course of your future.
Do not let your money depreciate. A savings account is a secured low-risk, option. Interested? Give Mission Federal Credit Union a call or visit them online to speak with one of the many friendly staff about starting a path toward financial security.
The content provided in this blog consists of the opinions and ideas of the author alone and should be used for informational purposes only. Mission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article by Mission Federal Credit Union is for the information and convenience of its readers and does not constitute endorsement, control or warranty by Mission Federal Credit Union.
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