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The
latest surveys by Bankrate.com show that the average
interest rate available on passbook or statement savings
accounts is 1.5%, which is the lowest it’s been in 15
years. Since the annual rate of inflation in the U.S.
averages about 4%, money in a typical savings account
could actually decrease in value by 2.5% each year. Why
would anyone put money in such a low-interest savings
vehicle?
Advantages
of a savings account:
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It provides a place to cash or deposit checks without
paying monthly service charges.
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It helps you get in the habit of putting money in
savings.
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It’s a good place for short-term savings and
emergency funds. Inflation won’t have that large
of an effect on the money if you leave it there less
than 2 years.
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You can withdraw your money any time without penalty
(in other words, your money has liquidity).
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It’s
safe — your money is insured up to $100,000 if you
bank with an FDIC bank.
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