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5/21/2014 8:58 AM
Many believe the money in their checking account is sufficient for their financial needs, but having an account devoted to savings is just as important. There are many reasons people choose to save, all of which are focused on the future. While your account may have funds available for today's expenses, there's no telling whether those same funds will be available two weeks or a month from now.
Here are some of the top reasons to open a bank account to save money:
To prepare for emergencies
There's no telling when you'll be met with a financial crisis that greatly affects your income. In the instance of widespread home damage caused by a natural disaster or even a medical emergency, you need funds to ensure you can continue paying your bills for auto loans, utilities and other expenses.
Many consumers have savings devoted specifically to covering their finances in case of an emergency. Financial experts typically agree that you should have enough saved to cover your regular expenses for anywhere between three months and a year, or at least $3,000 depending on your finances.
To prepare for retirement
Most Americans look forward to a day when they can kick back and enjoy the golden years, free of workplace responsibilities. However, ensuring a comfortable retirement requires adequate savings to compensate for the income you will no longer be receiving. Even if you can only contribute a small amount each month to your employer-sponsored 401(k) plan or individual retirement account, you should start saving as soon as possible.
Each year that you save yields more compounded interest, meaning that you can save much more if you start in your 20s than if you wait until your 40s.
To make a bigger purchase later on
Even though mortgages and other financing can help with the purchase of expensive items, saving more of your own funds can reduce the amount of debt you carry.
Many consumers who want to buy a home work toward saving 20 percent of the price of the home they'll buy. Although it can take years to accomplish, having this down payment saved can yield more favorable loan terms. The same can be true if you want to buy a car or even something less expensive like a digital camera or flat-screen television.
To save for college education
Student loans have high interest rates, and many college-bound consumers like to avoid borrowing a lot of money to fund their education. Even saving just enough to pay for a few courses can be beneficial for reducing long-term debt.
If you've already been through college, you should consider starting a savings account for your children. As long as you're making regular contributions, your kids can have a good financial start when they pursue an undergraduate degree.
To improve money management skills
One common theme among all the reasons people save is making better use of their money. When you have a savings account and make automatic transfers to the account, you can manage your funds without even thinking about them. Unlike your checking account, from which you make regular withdrawals, funds in a savings account are untouched until they are needed.
Additionally, locking away money for a major purchase can help with limiting frivolous spending habits. When given easy access to your available income, it can be easy to spend money on a new stereo or video game system instead of more pressing needs such as groceries and gas.
Whatever your reasons for saving, contact Landmark Bank to find out how you can open a savings account that best fits your future monetary goals.