Why You Should Open A Savings Account Now
Regardless of their financial situation, experts recommend that everyone should be investing in a retirement savings account. In fact, in a survey conducted by CNBC Make it, about half of Americans agree that people should start saving in their 20’s. However, despite the compounding benefits, financial security, and peace of mind for the future, most don’t start saving for their retirement until after their 20’s! About 61% of respondents to the same survey started saving from their 30’s onward, which affects how much your money compounds. Here are three important reasons why you should open a savings account now, even during a pandemic.
Advantages for First Time Openers
During the pandemic, interest rates on many savings accounts went down. This is bad news in general but serves as good news for those just opening their accounts. Those who decide to open an account now might start at low-interest rates, but as the economy improves and the world opens up, those interest rates will only go up. This means that your savings won’t take a loss because of the pandemic and will benefit from the interest rate rise once everything stabilizes a bit.
The Federal Deposit Insurance Corporation was created by Congress to “maintain stability and public confidence in the nation’s financial system” (FDIC.gov). This serves as insurance to protect the hard-earned money you’ve made throughout your life. According to the FDIC, they’ve never lost a single penny in their 73-year history. If you’re looking to lock up your money to make sure it’s there for you when you’re ready to retire, a professionally set up savings account is the way to go about it.
Starting early on your savings journey helps you have a sense of self-reliance once you’re older. While Social Security exists, along with Medicare, Medicaid, and relatives, your savings serve as more than a backup plan. Relatives and friends might be willing to make promises now to take care of you when you’re older, but life happens. Sometimes, the market crashes. Other times, sickness interrupts life unexpectedly. Both of these are very real things that happen to people. The best-case scenario is for you to make sure you take care of yourself and your partner if you have one.
Investing into a savings account allows for your money to compound. You might not be raking in thousands per month when you start, but all that money will compound on top of each other. Someone who starts with 1,000 dollars in their account and has a six percent return rate will get 60 dollars. Over five years, their account will be worth 1,300 dollars. That may not seem like a lot, but that is assuming the rate stays the same and they don’t deposit any more money into their account. Now imagine someone who starts with $5,000, deposits 500 into retirement every month, and has a 7% return rate. You can see how easily that money will grow from its initial deposit.
Learning the habit of saving isn’t limited to putting funds into a retirement account. Many people save to reach personal and professional financial goals. Rewards include building wealth for yourself and your family, increase self-reliance and self-care, securing money for a rainy day or retirement, and more. Also, the reasons to save can vary from obtaining small, guilty pleasure items to something as large as a home! If you have questions about how to plan out and reach your financial goals, contact us! We would love to answer any financial questions you may have about how we help people reach their goals.