You’ve probably heard about the importance of having a savings account. But what is it exactly and do you really need one?
The concept of a savings account works exactly like a piggy bank – it simply stores your savings. However, that’s where the similarity ends because unlike the piggy bank, a savings account can bring you more benefits. Curious to know more? Coincidently, we’ve gathered a few beneficial points to owning one!
What is a Savings Account?
First things first, let’s start with the basics. A savings account is specifically designed not only to keep your money safe, but it also allows you to withdraw money securely, all while earning you interest! A good tip to keep in mind before settling on a savings account is to do your research between banks. This is because annual interest rates vary from bank to bank and you might want to consider one that offers the highest interest rate. In case you’re wondering if the savings account is only something the rich and fancy can afford – this is where you’re wrong. Any Cambodian above a certain age is eligible to open a savings account with just $10 as the minimum balance in most banks. The savings account is useful especially for those who want to handle their finances in a better, more manageable way. Now that you understand the fundamental functions of a savings account, let’s talk about the benefits!
Curb Spending Temptations
Does anyone feel like saving is easier said than done? Because we do – especially when temptations are everywhere! From the new pair of Nikes to the latest iPhone – wouldn’t it be great if we can have it all? However, mindless spending can do us more harm than good. To keep our personal finance management on track, a savings account can help us do just that. Firstly, you should treat a savings account as an emergency fund. What this means is, that in no circumstances are you allowed to withdraw from this account unless it is purely for emergency purposes. For instance, booking an extra night at the hotel because your flight got cancelled the last minute. If you’re following the infamous 50/30/20 budgeting rule, then ideally you should put away at least 20% of your income into your savings account. The remaining 80% (30 per cent for wants and 50% for needs) should be transferred into your current account which is one that you’re allowed to use for daily transactions.
You see, by managing your money in that manner, it can help you distinguish between the money you should save and the money that you can spend. Take this scenario as an example, there’s a video game you would really like to buy. However, if you have all your money stored at home or in a single account, it’s harder to differentiate if you’re spending under your savings or spending tab because there’s no clear total amount of the two. In the end, temptation takes over and you then realised you’ve overspent for the month. Isn’t that too late?
On the contrary, if at the beginning of the month you’ve decided to allocate your money between wants and needs, you would immediately realise if you have enough money under your spending tab to get the game you want. So, while it’s good to pamper ourselves, it’s better to balance our spending, making sure that we can save and also enjoy the things we like! Which means, the next time you’re running low on your current account, that temptation to shop has got to wait till the next time because you should always only spend within your means!
Who doesn’t love a good surprise? Unexpected flowers during a date or a secret birthday cake to celebrate. However, surprises, like receiving a sudden large medical fees, or losing a job, are some situations we definitely don’t look forward to. So how do we avoid being cashless during these unforeseen rainy days? The only way to stay afloat is if you’ve built a good saving habit. You’ll also thank yourself for building your emergency fund in a savings account rather than having it stored at home. Here’s why.
In a case where you need emergency cash upfront, you’re able to head to the nearest ATM to make a convenient quick withdrawal. Saving your emergency cash in a bank is also way more secure as you avoid chances of losing all your hard-earned money over a case of robbery or flood. You also avoid unnecessary stress in cases of which you’ve accidentally misplaced your cash at home. Imagine what it would be like if you can’t find your emergency savings at a time you need it the most? Besides, don’t you think it’s more comforting to know that your money is stored safely in a bank during times like these? Hence, let us remind ourselves of the importance of knowing where to store our money and plan ahead when we can so that if and when the storm arrives, we’re able to weather it!
We all want our money to grow and one simple way to do it is by placing your cash in a savings account as it will earn you interest over time. A fixed deposit is another type of savings account you can consider. Sticking your money in an FD account usually earns you higher interest. However, there will be a 1-12 months tenure (depending on your agreement with the bank) in which you cannot withdraw your cash. Otherwise, you might need to pay an early withdrawal fee and lose the interest you had intended to earn. Additionally, the interest you earn from a savings or fixed deposit account is guaranteed, unlike other investments that depend on the market condition. Now can you imagine missing out on cash growth opportunities if you were to keep your money at home? Not to mention, cash loses its value over time due to annual inflation!
Another great benefit of a savings account is the ability to move money quickly. ATMs operate 24 hours a day, so in times of emergency, you’ll have no problem accessing your cash. The good stuff doesn’t just end there, if you download your bank’s mobile banking app, you can even transfer money easily from your savings account. Some banks even offer an E-Cash Service as a simple and secure way to send funds to friends, family or even yourself using a smartphone and withdraw it at any ATM. The best part? You won’t even need an ATM card to withdraw the money! Cool right? In addition, since a debit card is given to you, you could use it to pay for things conveniently and securely with just a tap or PIN entry. This eliminates the worry that you have to carry a large sum of money everytime you’re out and about. Life is already as tough as it can get, so why not take advantage of these a range of financial products to supplement your savings account, to make your life more convenient
Tip: It is advisable to only withdraw money out of your bank’s ATM within the given frequency limits. If you’ve withdrawn from another bank’s ATM or exceeding the frequency limits at your bank’s ATM — a certain fee will be implemented. These restrictions vary between banks, so it’s important to know these terms & conditions before you open an account.
We’ve saved the best for last. Do you know that most banks in Cambodia allow you to open a savings account for free? You’ll only need to deposit a minimum of $10 to be kept in your account! Now that we’ve covered the benefits of owning a savings account, we hope this article has given you some sort of comfort that the bank only has your best interest when it comes to your money.