Interest rates on savings accounts are at an all-time low. So does it still make sense to sock money away in a savings account? It’s true, it is hard to get enthusiastic about savings when interest rates on savings account are 1 percent or less and interest rates on certificates of deposit (CDs) are not much higher.
The truth is that money experts will tell you that the interest rate on savings should not be the determining factor on whether or not to put money in savings. Here are two good reasons to start saving.
In today’s economy, everyone should have an emergency fund. Unfortunately, too many people rely on their credit cards to fund their emergencies. Credit card interest rates begin at 9% and climb upwards. If you have a $500 car repair emergency, you can either pay it with your savings or your credit card. If you don’t pay off the credit card balance within 30 days, you’ll be accumulating interest until the $500 is paid off.
Most money experts recommend that you have a minimum of one month’s salary in savings at all times.
The Big Ticket Purchase
Saving for big ticket purchases, such as furniture, appliances, and electronics let’s you take advantage of sales and fully realize the sales price. While delaying a purchase until you can afford to pay in cash is no longer the norm—it is the best way to stay financially healthy. When you buy something on sale and pay with a credit card—the savings is usually lost when you pay the credit card interest.
Putting money away for an emergency and big-ticket items is always a good idea. It is never too late to start saving. Interest rates will go up eventually and you will be in the best position to take advantage of them.