3 reasons you should close your savings account
A savings account is your best option for storing your emergency fund. That means money you might need for unexpected expenses, like unplanned home repairs. However, a savings account may not always be the right account for every situation. Here are three reasons why it may be costly to close your business.
1. CD is better suited for your situation.
You may have a separate savings account for non-emergencies, but your emergency fund is nice and complete. If so, if you don’t think you’ll need access to your money in the short term, you may want to consider closing your savings account and transferring the funds to a CD instead.
The great thing about CDs is that they guarantee you a percentage of your deposit. With a savings account, interest rates can decline depending on market conditions. So, if you’re not worried about withdrawing your cash early and risking a penalty (which usually happens if you tap a CD before it matures), a CD may be your best option since you have all your emergency savings on hand. .
2. You have been saving for a specific goal that you have achieved so far.
Maybe you had money in a separate savings account to pay for a down payment on a house. Or maybe you were saving up to buy a car.
Once you’ve reached your savings financial goals, you may not want to open a separate savings account. Failure to meet the minimum balance requirement can get you in trouble, so why risk fees or fines for it?
3. You’re wasting money on long-term goals you should be investing in.
Savings accounts are a great option for short- or medium-term goals. But if you’re saving for a distant goal like retirement or college, it’s not a good place to invest your money.
reason? You could earn 4% or more by depositing money into a savings account right now, but today’s interest rates are not the norm. And even if it were, the stock market’s historical returns are much more impressive.
Over the past 50 years, the average annual return on the stock market has been 10%. So let’s say you have $10,000 that you want to allocate for retirement. And let’s say you could earn 4% of that money if you put it in a savings account over the next 40 years. So, you want to increase that $10,000 to about $48,000.
But instead, watch what happens to your stock portfolio. If you could earn 10% on $10,000 over 40 years, that would be worth just over $452,000. That’s a potentially retirement sum, but a nest egg of just $48,000 probably won’t be enough.
There is no need to keep a savings account open that does not serve a specific purpose. So, if any of these situations apply to you, it may be a good idea to close your savings account if you have other accounts open to hold your emergency fund.
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