Do You REALLY Need a Savings Account? (2024)

FAQs

Do You REALLY Need a Savings Account? ›

A savings account is a safe place to put your money when you can't afford to lose any or think you'll need it in an emergency. It's also a good place to put some of your investments as a hedge against losses – you can't lose everything if some of your money is in an ordinary savings account, after all.

No matter what your financial goals are or how much money you're able to set aside, opening a savings account is a good idea. You won't need a large pile of money to open an account at many banks, and a high-yield savings account at a federally insured institution is a great place to earn some interest on your funds.

If you're searching for a place to keep your money that you'll use for everyday expenses, a checking account might be your first choice. But if you're looking to set aside money for future needs and goals, opening a savings account is an option to consider.

Your savings account should have enough to keep you afloat in a financial emergency. Generally, having at least three to six months of living expenses can offer a safety net if you experience job loss or a medical emergency.

The lack of cash in either savings or checking accounts suggests that many Americans are living paycheck to paycheck. This leaves them vulnerable to unexpected expenses, underscoring the importance of having an emergency fund, if they're able to build one.

Savings account benefits include safety for your savings, interest earnings and easy access to your money. However, savings accounts may have drawbacks, such as variable interest rates, minimum balance requirements and fees.

Neglected bank accounts can be closed due to inactivity. If your bank doesn't have a way to contact you, it might turn your money over to your state as unclaimed funds.

Savings accounts are essential for financial health and stability. They provide a safe place to store and grow your funds while offering easy access when needed.

For the emergency stash, most financial experts set an ambitious goal of the equivalent of six months of income. A regular savings account is "liquid." That is, your money is safe and you can access it at any time without a penalty and with no risk of a loss of your principal.

Can you live without savings? ›

You can still live a fulfilling life as a retiree with little to no savings. It just may look different than you originally planned. With a little pre-planning, relying on Social Security income and making lifestyle modifications—you may be able to meet your retirement needs.

So to answer your question, if $1,000 a month is about 10% of your income, then you're doing good and putting back a recommended amount. If that is more than 10% of your income…then kudos to you for being able to lay back more than 10%.

The FDIC recommends keeping at least six months' expenses in an emergency fund. While $5,000 in savings is nothing to scoff at, it probably isn't enough for most people to meet that criteria.

Keeping at least three months of expenses saved can help you weather a job loss, major unexpected bill or other sudden expense. However, 27 percent of U.S. adults have no emergency savings at all, the highest percentage since Bankrate asked the question in 2020.

If you're starting to save for retirement at 40, that's not ideal, but it's also far from being too late.

Savings account interest rates can change at any time. This uncertainty can impact your ability to predict how much interest you might earn. Not ideal for long-term growth. While good for short-term goals, high-yield savings accounts may not provide the growth needed to build long-term wealth.

For savings, aim to keep three to six months' worth of expenses in a high-yield savings account, but note that any amount can be beneficial in a financial emergency.

20k is the ideal savings amount for a 25 year old

“Ideally, your savings should reach $20,000 by the time you turn 25,” says Bill Ryze, a certified Chartered Financial Consultant (ChFC) and board advisor at Fiona. The national average for Americans between 25 and 30 years of age is $20,540.

If you're 30 and wondering how much you should have saved, experts say this is the age where you should have the equivalent of one year's worth of your salary in the bank. So if you're making $50,000, that's the amount of money you should have saved by 30.

Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.