When banks offer interest rates that are close to zero percent, then it is not a surprise that consumers don’t want to bank their emergency funds there! For people who are financially savvy, the objective is to get a better return on their hard earned money. Therefore, these people will opt for mutual funds and stock instead of putting money in savings accounts with low interest returns. When you have liquid cash, though, you need somewhere to put those funds for a rainy day.
Consider this: if your salary was deposited in your checking account to pay your bills and what’s left over is put in an investment account or retirement fund, how will you handle emergencies such as:
· When your vehicle needs to be repaired during the same week that your mortgage payment is due
· When your condo association tells condo owners that they have to pay a one-time assessment fee for roof repair due to the recent storm since the condo reserves cannot handle it
· When you have a medical emergency and cannot afford the medication
· When you need some cash quickly and have no alternatives except to take money from your retirement account or investment account
· When your only option is using your high interest credit card
An emergency fund offers security and an option to getting the funds when you have no other recourse. You have the peace of mind, knowing that you are covered in case of an emergency and your retirement account can stay intact.
A Safety Net
If you want to have a safety net, (whether you will be receiving low interest rate on your money or not), a savings account is a viable option. It is better to have your money in a low interest rate account than keeping it at home. The future is not void of unexpected happenings and the future could be next week or three years down the road. You never know.
Comparing Savings Accounts
Most Americans keep their savings in a traditional bank account with low interest rates. It is best to shop around before deciding which bank to put your money. Credit Unions are also a great option and so are online savings accounts. You should be able to find a bank that would consider increasing your earned interest and lowering your bank fees, yet still meeting your financial needs. Not everyone would consider an online bank account for saving, but millennials will take that chance. Who are these groups of people? Millenials are young adults between the ages of 18 and 26. Their interest in advanced technology makes them open to thinking of banking online.
Internet savings account will often offer 0.9 percent in interest rates in comparison to the brick and mortar bank, offering as low as 0.01 percent. So, if you want the savings that you deserve, why not switch from the traditional savings account to an Internet-only savings account? With the Internet savings account, you would earn in excess of $250 yearly interest, but with the traditional savings, only $5 for the entire year.