With the average interest rate on U.S. savings accounts continuing to crawl along at 0.06% since 2013, the traditional savings account isn't the most attractive investment. However, low interest rates are no reason to avoid having an active savings account as part of your finances. Savings accounts serve important roles other than earning interest: they help you build up funds to cover both planned and unexpected expenses in the future.
Savings Accounts are Inexpensive
If you don't have a savings account at the moment, you're hardly alone. In 2015, the FDIC National Survey of Unbanked and Underbanked Households reported that 27.3% of American households had no savings account. In addition, 57.4% of unbanked respondents in the survey stated that they did not have enough money to open any accounts. Still others blamed high or unpredictable account fees.
In fact, most brick-and-mortar banks require just $25 to open a savings account, while several others ask for no opening deposit at all. If you're comfortable doing all your banking from the computer, most online-only banks also offer their own savings options, which come with no opening minimums.
As for fees, savings accounts are less exposed to extra charges than checking accounts. In general, the more transactions you make on an account, the greater your chance of running into fees. As long as you're avoiding withdrawals from your savings, there's little risk of overdraft fees, and the typical monthly charge of $4 to $5 at major banks is waived if you can keep a balance of $300.
Savings Accounts are Easy to Use
While it may seem that opening up a bank account will require a lot of management, the truth is that savings accounts are extremely easy to use. Nowadays, almost every bank provides multiple ways to deposit money into your savings, including direct deposits from your employer or benefit program and newer mobile check deposits, where you simply photograph and submit check images from your mobile device.
If you already have a checking account, opening a savings account at the same bank will allow you to set up free automatic transfers from checking to savings. Whether you schedule a transfer once a month or once a week, this feature makes it even easier to build up a nest egg without actively thinking about it. With regular transfer amounts of $5 or $10, you'll hardly miss the money from your checking balance, and over time, those deposits will accumulate.
Savings Accounts Improve Your Financial Stability
Just by having a savings account, you make it more likely that you'll save at least a little bit of what you earn. Because a savings account doesn't typically come with debit cards or checks, there are more barriers to withdrawing that money compared to a checking account. Such barriers can protect your savings from your own spending impulses. At the same time, with access to a bank branch or ATM, your savings will be there for the expenses you really can't avoid.
The connection between checking and savings accounts can also help you avoid paying overdraft fees on your checking account. Many banks offer overdraft protection service, in which you pay a transfer fee in order to cover any checking deficits out of your savings account balance. This saves you from the overdraft fee, which is typically $35 —although the transfer fee itself costs around $12.