A savings account is an interest-bearing deposit account held at a bank or other financial institution. Though these accounts typically pay at a modest interest rate, their safety and reliability make them a great option for parking cash you want available for short-term needs. Savings and other deposit accounts are important sources of funds that financial institutions can turn around and lend to others. Savings accounts offer you a place to put your money that is separate from your everyday banking needs, allowing you to stash money for a rainy day or earmark funds to achieve a big savings goal.
Long-term savings accounts, which can include options ranging from money market accounts to IRA(Individual Retirement Account)s, allow you to build savings over an extended period of time through regular contributions and earned interest. A long-term savings account allows one to take advantage of compounding interest over time. The longer one has to save and let the interest compound, the more their money can grow. Long-term savings accounts are generally suited for goals that are several months or years away. Here are some key features of a Long-term Savings Account.
Time Period-
Long-term savings give you enough space to get aware of the market trends and the features of different saving instruments in the long run. It is highly effective and very likely to result in meaningful wealth creation because it places the focus of an individual focus on things that really matter when it comes to saving. So, instead of thinking about day-to-day fluctuations of stock prices, one would focus on the company’s growth prospects or management competency. All these factors lead up to a reasonable long-term return.
Diversified Portfolio-
Diversification allows your portfolio and business and social reach to grow further. In the long run, you can put your money in diverse financial products and invest in various fields, thereby reducing your risk and generating greater returns in the long run.
Risk-
Risk is substantially lowered in the case of long-term Savings accounts. The probability of risk is high in the case of short-term savings due to rigorous fluctuations and brevity in a small span of time.
Conserving inflation-
Savings through a longer time period help you beat inflation as time joins hands with compounding, thereby enabling you to maximize your wealth.
Let’s see how to choose the right Long-term Savings Account.
Identify the savings goal and time horizon. The type of long-term savings accounts an applicant chooses will depend on your needs, investment time horizon, eligibility and ability to pay additional fees, and several other factors. .It’s important to match the type of account one uses with their goals in order to select the best long-term saving plan for them. Suppose you sign up for a long-term savings account. It is then utterly important for you to choose your timeline accordingly because by establishing a timeline, you can choose the correct savings product based on the number of years you have left to save. One of the other concerns to weigh is liquidity or flow of cash.
Consider how much access you may need to your funds, and compare that to the type of access an account offers. In general, if you need more liquidity, you may have to accept a lower Savings account interest rate, such as those offered at a bank or credit union, or financial institute. The Savings Account Interest rate of several banks are:
- Axis Bank- 6.90%
- ICICI Bank-6.50%
- SBI- 6.50%
- HDFC Bank- 6.00%
- Citibank- 5.25%
Once you understand your timeline and liquidity needs, compare the long-term savings account offers to look for the best interest rates. Maximizing your earnings and having a clear repayment history will help you achieve your investment goals faster.
Now, you can open a Savings account online, and to make the right choice, these are the things you must remember. There are four types of long-term Savings accounts-
- High Yield Savings Account
- Certificates of Deposit
- Individual Retirement Accounts and
Employer-Sponsored Retirement Accounts
Before opting for one of them, keep these points in mind, and that’s how you make the right choice by applying at a bank or opening the Savings Account online.
- Analyze multiple savings accounts and CDs(Certificates of Deposits), so you can research more carefully and get the best Savings Account Interest rate possible. Search online to compare the interest rates more easily before you open your Long-term Savings account.
- Pay attention to the maturity dates of your account policy. Early withdrawal of money might wipe out the interest you’ve earned already.
- Savings Account interest rates might vary- be it long-term or short-term. Keep that in constant check to avoid any financial hassles.
- Choose the longest and the most convenient timeline that’s gonna ease the transactions in the future. You know your credit and monetary conditions, and that always comes before eligibility.
- Check your account fees regularly. Despite good returns from the account, hidden and additional fees might cause more hurdles.
