A savings account happens to be one of the safest options for opening an account with a financial institution. This type of account yields interest on your deposit, although the interest is usually low. Thus, it is generally used as a means to accumulate money that could be needed at any time.
The question is, is a savings account an asset?
In answering the question, is a savings account an asset, it is necessary to understand that assets are whatever you own that has a monetary value. A savings account can be considered as both an asset and a liability. It is an asset because the fund in a savings account is usually accessible to the financial institution to invest it and generate more money both for the bank and for the holder of the account. It is also considered to be a liability because, with a savings account, customers of the financial institution have access to withdraw their money at any time, thus the institution must be ready for these withdrawals and make the funds accessible upon the customer’s demand. Continue reading for more information on the subject matter.
Advantages Of A Savings Account
Operating a savings account has some benefits that we will be discussing here. You must understand these benefits and get the right guide when deciding what type of account to open.
One advantage of a savings account that gives it an edge over other types of accounts is that it is relatively safe. It is a low-risk account that does not make you lose your money. When your primary concern is to keep your money safe, the savings account becomes your best option. The fact that your financial institution is insured with the Federal Deposit Insurance Corporation and the National Credit Union Share Insurance Fund keeps your deposits into your savings account very safe. With this, you are guaranteed to get your money back when the institution is robbed or liquidated. Thus, operating a saving account is a safer alternative to keeping your cash elsewhere.
With a savings account, you can gain access to your money whenever the need arises. This feature is essential, especially in cases of unforeseen circumstances. You can withdraw your money at any of the branches of the financial institution, use ATM cards, mobile codes, apps, and other online methods. It has become easier by the day to do that. There are ATMs everywhere that function around the clock to give you easy access to your money at any time of the day. However, you must not exceed the limits for withdrawal per time. You can also deposit money into your savings account at any time.
The amount of money you need to open and operate a savings account is very low. It makes this type of account preferable for low-income earners, students, and regular people. In some banks, you do not need any money at all to open a savings account. Some also do not require a minimum balance in your account. The essence of this is that you can withdraw all the money in your account when you want to.
Another advantage of a savings account is that it accrues interest on your money. The money kept in your savings account keeps generating interest for as long as it remains there. Although the interest it generates is not high, it is sufficient that no matter how little something keeps adding to the money you saved in your savings account. The mere fact that the funds held in a savings account earn interest, it becomes a form of safe investment for the account holder, which is guaranteed unlike other volatile types of investment.
Your savings account allows you to automate payments. With your card, you can make automatic payments out of your account without missing payments that are recurring. It works in a manner that when the set time to make a particular payment approaches, the money is debited from your savings account for that payment. The feature keeps you up-to-date with all your payments and helps you to avoid incurring any extra charges or lateness fees.
Disadvantages Of A Savings Account
It is a common notion that everything that has an advantage also has a disadvantage. Operating a savings account is not different. Like you have advantages you stand to benefit from when you operate a savings account, there are also disadvantages to this type of account.
One of the disadvantages of operating a savings account is that the interest rate is very low. If you are planning to get rich or raise money for a future purchase, embark on a project, or come out of debt, a savings account is not the option for you. The interest rates are so low that the returns on your money make little or no difference. Some banks offer below one percent as interest per annum, which is very insignificant for investing your money for one year.
A savings account is subject to charges by your financial institutions. The charges are usually almost consistent with the so-called interest that your money accrues over time. Thus, the reality is that your savings account yields interest on one hand, and it is taken away on the other hand through charges that the bank imposes on the use of your account.
It was mentioned earlier that withdrawals from your savings account have to be within the federal limits. The fact that there are these limitations on how much you can withdraw from your account serves as a critical disadvantage of operating a savings account. When you exceed these limits and withdraw beyond what you are expected to withdraw in a month, you attract charges that have to be paid for exceeding these limits.
How A Savings Account Is Managed
Banks and other financial institutions manage savings accounts. To maintain your account, they sometimes charge fees to cover for the cost of maintaining your account. It is their responsibility to provide you with everything you need to access your savings account, like the information concerning your account, a passbook, and an ATM card. The bank also gives you a periodic update about the activities on your account. It does this by issuing you a statement of account. The statement of account could be weekly, bi-weekly, monthly, or annually. It could also be upon demand by the customer.
How Do You Open A Savings Account?
Opening a savings account is a step that you need to consider your options and saving goals before you proceed carefully. Different financial institutions have various offers for a savings account, so it will make a lot of sense to look at these offers, compare them, and chose a financial institution with a better offer that suits your needs.
To open a savings account, you need to get your documents ready and approach the bank. After creating the account, you would need to fund it. Please take note that some banks require a minimum amount of money before you can open a savings account. However, for others, there is no such requirement, and you can open the account with no amount of money.
The Limitations On A Saving Account
There are federal limits on withdrawals for a savings account. The imposition of federal restrictions on a savings account means that you cannot withdraw beyond certain limits from your account in a month.
The limitation on your savings account is that you cannot withdraw more than six times in a month from your savings account. The restriction is imposed by the Federal Reserve Board Regulation D. When you try to withdraw beyond this limit, the bank will either decline your request for withdrawal or charge you fees on them.
What Differentiates A Savings Account From A Checking Account?
A savings account is different from a checking account in some ways. It is these differences that you need to take note of when deciding to be sure that the option of a savings account is the best fit for you.
A checking account is designed for your day-to-day use. Thus, you have easy access to your funds every day. However, your money in a checking account does not yield interest, even though it has other benefits.
Although, a savings account and a checking account share similar features, the fact that there are no limits imposed on a checking account and that it can be used everyday differentiates it from a savings account. Therefore, you must evaluate your needs to know which of them will work for you
Are you indecisive about whether or not you should have a saving account and is probably asking, is a savings account an asset? The answer is right in front of you. A savings account could be an asset and a liability at the same time, depending on how you look at it and the angle from which you are viewing it. However, the reality is clear to you, and you can make an informed decision that suits your needs.
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