SavingsAccounts.net

Savings Account is often the first account that is opened by an individual. It defines the notion a layman has of the banking industry. There are different types of savings accounts catering to different needs of the customers. With the variety of options available it is a real non hassle these days on getting the maximum out of one’s hard earned savings. However there are pros and cons of savings accounts.

The advantages of savings accounts are many fold. It is the simplest way of earning money on one’s liquid assets. The more the balance in the account, the more returns it garners. A savings account is generally easily accessible through ATM , the Internet and through local branches. Parents can make provisions for the children by opening a savings account for a child below the age of 18. While the parent is the custodian of the account, this provides a healthy knowledge for the kids to know the value of money and savings. Cash is safest in a bank deposit as the FDIC insures the money an individual has deposited in a bank. Thus one does not have to fear insolvency or the declaration of bankruptcy by the bank. Savings Accounts also offer the option of auto deduction of payments of mortgages and auto loans from the account. Investment in an ISA offers returns that is not taxable, hence is an excellent choice for a savings option. Savings Account is an important fixture in the investment portfolio of an individual as it is vital cog in the long term financial plans for it enables to take care of specific goals such as the buying of a car or a home. Besides this some types of savings accounts offer a bonus on the returns of an account.

The disadvantages of savings accounts lie in the fact that most savings accounts don’t allow withdrawal of money as per the wish of the account holder. There is a limit on the number of times one can withdraw from an account. A monetary penalty is incurred if one withdraws before the stipulated time. Savings Accounts that offer the facility of no notice withdrawals offer very low interest rates as compared to the other types. In addition if the account does not have a fixed rate of interest, then the returns can diminish with time. On the other hand if there is a fixed rate of interest and there is an increase in the basic interest rates, the investment returns will be significantly lower. While the returns are decent in Savings Accounts, one can never hope for a windfall associated with stock trading; which is albeit fraught with risk.

Apart from saving for one’s retirement the biggest financial worries besetting a person is ensuring the healthy finances of one’s children. Along with generation gap there is also a gap in the notion of spending money of parents and children. Innumerable parents across the world have had to face the growing cash demands from their rebellious teens. Expenses that are considered extravagant by parents are sometimes justified by the kids as more often than not, they improve the social stratum of the younger generation. Keeping this in view, it is necessary to inculcate in the child from an early age the value of money and importance of savings.

Child Savings Accounts such offer a multitude of facilities. Unlike other savings accounts, they can be opened with as low as a balance of $1. As the balance steadily increases with time, credit interest accrues on it. The savings accounts offer cash cards which can be utilized to withdraw cash from the ATM and debit cards which make shopping for kids an enjoyable affair. Most of the banks offer a monitoring service for the custodians of the account so that the spending habits of the children can be observed by the parents. The banks also allow planning the investment of the savings account balance in different equity instruments or mutual funds according to their risk appetite in order to gain more returns.

Studies have shown that children with savings accounts to their names get lifelong benefits from it, which is not restricted to monetary benefits. Experts believe savings accounts such as Child Development Accounts (CDA), which allow parents and children to save money for future needs such as a higher education or entrepreneurship initiatives offer services of a more holistic nature rather than just a financial one. These children have a greater chance than their contemporaries to attain educational achievements, go for higher studies and expand their financial literacy.

Savings Accounts for children are also beneficial for banks and other financial institutions as it helps them to retain faithful customers from a very young age. In fact it has been the trend that people have remained loyal to the banks with which they opened their first account as a child. Keeping this in prerogative banks have also cashed in on this ripe market and are encouraging savings accounts for children with various incentives.

Every other parent must have once or the other remarked to their kids that “money doesn’t grow on trees”. Better still open a savings account for the children and let them realize so.