A Fresh Look at Savings Accounts

With the myriad of saving options available – and, let’s face it, dismal interest rates over the last decade or so – the necessity of having a savings account is debatable. But they remain a viable part of a successful investment strategy. While savings accounts are not high-interest-rate vehicles, they do offer several advantages over other savings vehicles. Consider these five advantages before putting your money in a CD or another type of investment.

[RELATED: Want to Save More? Give Your Savings Account a Name]

Liquidity
Your car got towed. The heater broke in the middle of winter. Sometimes you need quick, easy access to your funds. As a starting point to a successful investing career, savings accounts are hard to beat.

With most investments, there’s a time lapse in getting access to your money. Having and maintaining a healthy savings account means immediate access and no stress when you need to get your hands on some emergency cash. Savings accounts and money market accounts allow you to withdraw your money at any time, which is rarely an option with CDs or long-term investment options. Savings accounts allow for unlimited withdrawals by teller, mail or ATM, but federal regulations limit you to six telephone, electronic, or pre-authorized transfers per month. Keep in mind that only three of these withdrawals can be by draft, check, or debit card. Nevertheless, you can access your money when you need it most.

It’s always safe
We should all heed Warren Buffet’s rules of investing

: Rule 1: Don’t lose it. Rule 2: See rule No. 1. When it comes to the safety of your money, it’s hard to beat a savings account. The Federal Deposit Insurance Corporation (FDIC) guarantees up to $250,000 of your money in a savings account. This makes a savings account or money market account a great vehicle for stashing money. If your money is in a credit union, the National Credit Union Share Insurance Fund (NCUSIF) will insure your savings account up to $250,000, too.

It’s easy to start
Hatching an investment plan can be intimidating and confusing. But getting started with a savings account is simple, quick, and easy. Unlike mutual funds, stocks, bonds and Roth

IRAs, there are no minimums, no fuss, and no conditions. You don’t need any special investment knowledge and you can always reinvest what you have deposited there somewhere else. But remember, you can’t reinvest what you never put there in the first place.

It gives you time to learn
Ignorance is one of the biggest obstacles holding people back from being determined and consistent investors. This is directly correlated to fear about losing money. Opening a savings account allows you time to learn all you can about whatever type of investing interests you. And once you decide on a more advanced method of investing, you’ll already have some money saved up. Watching your savings account grow can be a tremendous confidence booster and inspire you to aim higher with another type of investment vehicle.

Higher-yield savings options
Many online savings accounts offer slightly higher interest rates than ones at your local branch. These are ideal for long-term saving, such as an emergency fund. Online savings accounts mean lower overhead costs for the bank offering them and this, in turn, allows for the account’s higher interest rate. If you are willing to do all of your banking online, you may see substantial returns on your money compared with a local branch.

For information on the best savings account rate, to compare savings rates, or to find top banks, check out www.savingsaccounts.com. And go to http://www.bankrate.com/finance/savings/fdic-insures-bank-deposits-to-250-000-1.aspx for more on how the FDIC backs up your bank deposits.