Savings accounts have traditionally provided an excellent source of both security and income. With saving account interest rates near zero, the income-producing role of those accounts has become outmoded -- at least for the time being. However, given the absolute security of FDIC-insured savings accounts, they can still play several roles in your financial mix.
Here are five useful roles savings accounts can still play, even in today's low-interest-rate environment:
1. A starting point for savings
At the beginning of your career, the most important decision you can make about retirement saving is simply to start saving. There will be other decisions to make later, involving what targets to set and how to invest. However, the risk is that if you try to start with a comprehensive plan, it is too easy to get bogged down in all the decisions involved and put off starting to save. There is a tremendous amount of power in starting retirement saving early, and beginning with an ordinary savings account may be the simplest way of getting started.
2. Your financial distribution center
People tend to have their paychecks directly deposited into a checking account, but consider a savings account instead. Having your pay go into a checking account makes it easy to access, but not all of your income should be made available for spending. Having wages deposited into a savings account gives you a better base from which you can transfer a budgeted amount into checking, but also designate some money for investment and leave some reserve in savings.