Well-balanced finances include cash reserves through a savings account. Traditionally, savings have been a low risk financial move because money is not tied up in stocks or other investments.
However, due to its low risk, saving is not a lucrative as investing. Hence the sayings, more risk-more reward and low risk-low reward.
Savings accounts pay interest on the amount of money deposited in the account. To figure out interest rates for savings accounts, you can check your bank’s interest rates page.
If you began with $1000, contributed $100 each month for 10 years and earned 0.5% in interest on the balance each year…
You would have around $13,325 saved, having contributed $13,000 – a $325 gain over 10 years.
While savings accounts generally underperform returns via investing, they’re still important. Funds in a savings account can be easily accessed in the event that an emergency expense comes up. Also, savings can be used to fund vacation, a new car, or even a house down payment!
The biggest benefit of saving is its low-risk nature and the safety net that comes with it.