What Is A Savings Account And How Do They Work
The most common type of bank account and almost everyone’s first bank account is a savings account. Opening up a savings account will help you put your money in a safe place and lessens the chances of you spending it on unnecessary items. These types of accounts have a very low maintaining amount or might not require any minimum balance at all.
Besides being less likely to spend it, opening a bank account ensures that your money will be insured. If your home gets robbed or any other accidents occur, your money will still be in a safe place, locked in a fireproof safe surrounded by 24/7 security personnel.
When putting money in a bank account, you also gain a little interest. Interest is the amount of money the bank pays you because they use your savings account to fund loans and investments.
Basically, a savings account works like this:
● You open up a saving account at the bank
● The bank uses the money you leave in your account to fund loans
● The bank then pays you a small interest from the money they earn from the loans
This can be a hard idea to grasp. Questions like, why does the bank use my money for their own needs? If the whole point of saving my money is to save my money? That’s how banking works. Trust is the foundation in which banks are built on.
The bank will always have enough money on hand to give you the money you want from your account in case you might ever need it. Even if your institution fails or goes bankrupt, you will still get your money back as it is protected by third party independent agencies like the Federal Deposit Insurance Corporation.
Since the establishment of the FDIC in 1933, not a single person has lost money in a bank or credit union which was ensured by the corporation.
What Is A High Yield Savings Account?
A high yield savings account is a deposit account with a much higher interest rate compared to a standard savings account. This depends on the kind of financial institution you choose to save your money in. These financial institutions are usually the ones that offer high yield savings accounts.
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