Do not leave unwanted financial assets in a useless account. Instead, try to increase their value. One way is by transferring money to a savings account that you can open in almost every bank. If you’re thinking about using this product, get to know first of all with its good and bad sides.
What is a savings account and what are its benefits
A savings account allows you to increase the value of invested funds with higher interest rates without any time deposit, all without charge for account management. It opens mostly for an indefinite time as a supplement to a current account. The use of the savings account does not entail any risks because the deposits are insured with the State Agency for Deposit Insurance and Bank Rehabilitation, in accordance with legal regulations. The interest rate you earn is credited to your account each month, and contracting is very easy.
Choose from two variants
This type of savings can be realized by opening a savings account in one of the banks or by negotiating sight savings. In the second variant, you will receive a savings book to which you will be charged deposits, in dollars or in foreign currency. Banks for this type of savings do not take any fees other than to replace a damaged or completed booklet. This is a very simple way of saving, with a relatively low-interest rate, and it allows you to quickly raise money in a bank or ATM.
Negative sides of savings accounts
So far, we have just mentioned the good side of savings accounts. Are you interested in their shortcomings? Given the inflation, the increase in the value of money by this way is not satisfactory. Some banks require savings by opening a current or foreign currency account. The interest you will get through this way of saving is relatively low compared to the opportunities offered by term deposit.
What money should you have on a savings account
A savings account is payable and flexible if you always want to have some kind of reserve at hand, which you will be able to use in case of illness, unexpected expenses or in case of loss of employment, and you intend to spend it within 12 months. This kind of savings is not paid in case you plan to use the funds in just a few years. In this case, the income will not be covered by inflation, so it is better to look for another banking product with a better interest rate.
Also, keep in mind that when choosing savings, there are several elements that are desirable to know to successfully deposit your money. Since each of us is in a different financial situation, there is no universal answer to the question of which saving is the best, but the goal is always the same: to find the best savings, in order to always have available funds for everyday needs, and to receive surplus as much interest as possible minimal risk level. You should consider some of these steps:
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Analysis of the current state of finances
One of the prerequisites for saving is to have excess funds. In today’s crisis situation, it is difficult to talk about costs, but there is almost always space within home finance where a small surplus can be created. If you have other sources of funds such as inheritance or annuity, you need to manage that money to get the most out of it.
- Choose the type of savings
The next step in deciding how much we are willing to set aside for saving is the decision on the type of savings. There are several types of savings, each of which has its advantages and disadvantages. Savings on demand, or a vista, represents the money in the current account for which you receive interest. The benefits of this form of savings are the easy availability of funds at all times, the security and reliability of the bank as a guardian of your money. The main shortcomings are low-interest rates compared to other forms.
Term savings is the most common form of savings, where you make money in a bank with certain interest rates and you are obligated not to use it for a certain period. Benefits are security and higher interest rates, while the main disadvantage is that, in the event of premature decoupling, you lose interest.
Savings is a product that allows you to make an annuity – the interest on your savings deposit during the term of deposit. Interest is paid as an annuity, or as your additional regular income. As the needs of clients often vary, most banks offer different savings combinations that include premiums, increased interest rates, and other benefits.
- Choosing the optimal duration of savings
Under short-term savings, it is calculated less than a year. The most common short-term time deposits that banks offer are 1 month, 3 months, 6 months, and 12 months. Long-term savings include time deposits at 12, 24, 36, 48 and 60 months.
- Selection of interest rate
An immutable interest rate guarantees the savings of a precisely determined pre-agreed amount of interest after the expiry of the term deposit. The variable interest rate, on the other hand, varies over time as banks adjust interest rates to the existing market conditions.
- Negotiating savings under the desired conditions
The last step is to personally go to the bank and sign a savings contract. Most contracts are standardized and equally protect the interests of savings accounts and banks. After signing, it is necessary to keep notes on the expiry of the term deposit in order to re-establish at the moment where you are most worth saving.