It is easy to become bewildered about the array of different savings accounts, but they remain one of the most beneficial and satisfying banking options.
Benefits of a savings account
There are numerous benefits to opening a simple, old-fashioned savings account.
1. Easily accessible
Most banks allow you to have full access to your savings account at any time without being penalized.
You can usually transfer money easily between a chequing and savings account.
Some banks do require that you keep a minimum balance in your savings account for it to stay open, but any amount over the required balance is readily available.
2. Helps you save
Setting money aside in a separate account from your chequing is one of the benefits of a savings account.
Although accessible, money in a savings account is not as readily available as money in a chequing account.
Creating a savings account puts you in the mood to save and helps you control your spending. It is often one of the first steps toward creating a stable financial future.
Saving money lets you plan for a rainy day or an unforeseen calamity.
3. Reduced or no-fee account
Many banks provide savings accounts free or at a reduced expense to encourage their clients to keep their money in the bank long term.
Some banks even offer interest on savings accounts.
Keeping your money at home is rarely a good idea because it could be stolen during a home invasion, or destroyed in a house fire, flood or other severe storm.
Money in a bank’s savings account is protected and insured for up to $100,000 through the Canadian Deposit Insurance Corporation (CDIC).
However, ensure first that your bank is a CDIC member. If there is a bank robbery or the bank burns to the ground, your money will be returned to you in full.
5. Overdraft protection
Many banks tie savings accounts to chequing accounts to provide overdraft protection to the chequing account.
If you write a cheque for more than you have in your chequing account, your savings account could be used as backup, and save you from overdraft penalties.