A savings account is a good place to keep money safe for future needs. Savings accounts are particularly useful for the money you may need within the next few years. You might not earn much in savings, but as long as your funds are federally insured and you’re fee-conscious, you’re not going to lose that money either.
Some common uses of savings accounts are as follows:
- Saving for major purchases: If you’re planning to buy a house or a car within the next few years, you’ll probably need a down payment to qualify for a loan—and get the best terms. A savings account is a good place to build and store that down payment while you’re getting ready to buy.
- Vacations or other upcoming expenses: You’ll enjoy your vacation even more if you’re not going into debt and you have sufficient funds to pay for all of that fun. Build up a vacation fund in a savings account by transferring money from your earnings every month. By getting that money out of your checking account, you won’t be tempted to spend it.
- Emergency savings: Life always manages to surprise us. An emergency fund can help you avoid taking on toxic debt. Funds in a savings account are generally accessible without any penalty, so you can take care of issues quickly.