Savings account benefits
Saving has many purposes and is essential to plan financially for the future. It is also your plan B, your back-up. It means you have access to money when you need it, and you’re never stuck without essential funds.
Why save?
1. Unexpected expenses
Life happens. Perhaps you have a car that needs major repairs or your swimming pool is green because the pump needs replacement. Do you have extra cash on hand or are you making use of your credit card for emergencies? It’s better to save up and have peace of mind that you’re able to cover expenses without having to pay interest on it.
2. Planned expenses
Saving in advance for expenses such as birthday gifts and holidays will not only help you plan better, it will also ensure your financial year is relatively stress-free.
3. Financial security
What happens if you get retrenched and you’re waiting for UIF to pay out? Will you have enough income to survive? Saving money will help you in the long run should you lose your job.
Know yourself
The first step in deciding what kind of savings account you need is by getting to know the reasons why you want to save. It has the added bonus of creating a sense of anticipation and inspiration to save.
Ask yourself the following:
- Do I want to withdraw money whenever I want?
- Do I want to protect my savings and not make regular withdrawals?
- Do I want a simple untouchable savings plan that will help me reach a specific goal?
- Do I just want to save money for a rainy day?
Once you’ve answered these questions, you will have a good idea of what you need from your savings or investment account.
Short-term savings accounts
- Immediate access to your cash
- Perfect for smaller goals (appliances and furniture)
- Good for an emergency cash stash
- Use it as a “car repair” account
- Earn some interest but have your back-up money too
Long-term savings and investment accounts
- Save for five years or longer
- Get higher interest on your money
- Perfect for long-term saving goals like a car, house or education
- Easier to resist using because you will have to give notice to use the money or pay a penalty
Each savings and investment account has its own benefits. It’s important to do research on the account to ensure you open one that is best suited for your needs.