Currency is arguably the eighth wonder of the modern world, as people have no longer been required to barter goods and services with one another for products and services others desire. Rather, people participating in capitalistic economies across the globe simply offer standardized currency backed by governments in exchange for any product they can put a price on.
An inherent part of modern currency, however, is that a dollar loses value over time due to a phenomenon called inflation. Even though inflation goes against the wealth-oriented welfare of income earners, it’s actually a sign of a healthy economy.
Participants in capitalistic economic markets can safeguard against inflation through, more or less, two means: stow their hard-earned money away in savings accounts provided by financial institutions or invest money in shares of public companies, government and corporate bonds, precious metals, commodities, and real estate, among other financial instruments.
One downside of investing, however, is that investors are generally unable to exchange their invested assets purchased with currency back to its original fiat form. If they are able to make such a premature swap, it typically is coupled with relatively substantial fees that leave investors with less money than they started with.
Savings accounts, even though they typically never generate the same returns as investments, allow account owners to withdraw either a set dollar amount of initiate a limited number of transactions without penalty, providing account holders with substantially more freedom than if they were to invest such money via traditional means.
Further, money in savings accounts is never prone to market fluctuations that could cut investors’ sums in half, if not reduce their value to mere pennies.
The Various Types of Savings Accounts:
Savings accounts can prove beneficial to account holders when used appropriately. Such appropriate use involves understanding the various terms and conditions of savings accounts (SA) and weighing the pros and cons prior to depositing money in such secured stores.
Basic SAs are those that offer limited interest, set withdrawal limits, all typically offered at no charge.
Online SAs are simply those that can be accessed through the Internet, and usually offer the same liberties as described above.
Money market accounts are essentially high-dollar checking accounts that generate interest, though account holders are limited to an agreed-upon number of withdrawals. They generally require hefty initial deposits.
Make sure to read the fine print prior to opening a savings account! Doing so could save you money and help you reach your long-term financial goals.