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What is the point of a savings account

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Insomniator

Diamond Member
Hey everyone I've had a full time (as a temp) job out of college for about 6 months now and only put my money in a checking account.

Now I'm really not saving jack so far (about a grand, making ~600/week living at home) so I'm thinking about a savings account. But I really don't see the point other than what, 1% interest?

Does it matter what bank i get a savings account with? I figure I could just take like 150 a week and put it into savings thus forcing me to not spend money, not that I know where the hell it all goes anyway. Oh wait, I get taxed like 130 a week, thanks gov!
 
So would you stuff it under your mattress and earn 0% interest, or put it in a checking account and earn .10%
 
There are three points that I use them for:

1) Emergencies. You need some cash saved up for emergencies. Yes, you can do better by putting your money into stocks, but you can't get cash in you hands from stocks in 15 minutes, like you can from a savings account (assuming you need the cash during banking hours). Most emergencies are under $500 and virtually all are under $2000. So, you should have $500 or even better $2000 in savings. If you can think of an emergency where you need more cash, then you don't have the right insurance policies. The rest over $2000 should be invested in a better location.

2) Interest. If you go with the $2000 savings account, then your 1% example will give you $20 a year more than having it in checkings. $20 isn't much, but it is something. And interest rates won't stay low forever.

3) Overdraft. If you don't "know where the hell it all goes anyway", then you aren't keeping good tabs on your checking account. A bounced check could easilly run you over $50 in bank fees, and that is if you aren't thrown in jail for it. Link your savings account to your checking account and you might pay a nominal fee if any for protection.
 
My checking account has a 5% interest rate, so no....I do not have a savings account. However, the benefit of savings is more the mindset. You hopefully don't carry around an ATM card for your savings account. You know that that money is not for spending. If you have strong fiscal discipline, and a checking account with interest, a savings account isn't really necessary.
 
Originally posted by: Insomniator
Hey everyone I've had a full time (as a temp) job out of college for about 6 months now and only put my money in a checking account.

Now I'm really not saving jack so far (about a grand, making ~600/week living at home) so I'm thinking about a savings account. But I really don't see the point other than what, 1% interest?

Does it matter what bank i get a savings account with? I figure I could just take like 150 a week and put it into savings thus forcing me to not spend money, not that I know where the hell it all goes anyway. Oh wait, I get taxed like 130 a week, thanks gov!
Click to expand...
You're saying you are being taxed at a rate of 21%? I don't buy it.
 
Originally posted by: her209
Originally posted by: Insomniator
Hey everyone I've had a full time (as a temp) job out of college for about 6 months now and only put my money in a checking account.

Now I'm really not saving jack so far (about a grand, making ~600/week living at home) so I'm thinking about a savings account. But I really don't see the point other than what, 1% interest?

Does it matter what bank i get a savings account with? I figure I could just take like 150 a week and put it into savings thus forcing me to not spend money, not that I know where the hell it all goes anyway. Oh wait, I get taxed like 130 a week, thanks gov!
Click to expand...
You're saying you are being taxed at a rate of 21%? I don't buy it.
Click to expand...

Yeah, 37.5 hours x 16/hour and the amount auto deposited each week is 471 bucks.
 
Originally posted by: Deeko
My checking account has a 5% interest rate, so no....I do not have a savings account. However, the benefit of savings is more the mindset. You hopefully don't carry around an ATM card for your savings account. You know that that money is not for spending. If you have strong fiscal discipline, and a checking account with interest, a savings account isn't really necessary.
Click to expand...

Reward checking FTW.
 
Originally posted by: Insomniator
Originally posted by: her209
Originally posted by: Insomniator
Hey everyone I've had a full time (as a temp) job out of college for about 6 months now and only put my money in a checking account.

Now I'm really not saving jack so far (about a grand, making ~600/week living at home) so I'm thinking about a savings account. But I really don't see the point other than what, 1% interest?

Does it matter what bank i get a savings account with? I figure I could just take like 150 a week and put it into savings thus forcing me to not spend money, not that I know where the hell it all goes anyway. Oh wait, I get taxed like 130 a week, thanks gov!
Click to expand...
You're saying you are being taxed at a rate of 21%? I don't buy it.
Click to expand...

Yeah, 37.5 hours x 16/hour and the amount auto deposited each week is 471 bucks.
Click to expand...

State tax, federal tax, social security, medicare, 401k?
 
Originally posted by: JLee
Originally posted by: Insomniator
Originally posted by: her209
Originally posted by: Insomniator
Hey everyone I've had a full time (as a temp) job out of college for about 6 months now and only put my money in a checking account.

Now I'm really not saving jack so far (about a grand, making ~600/week living at home) so I'm thinking about a savings account. But I really don't see the point other than what, 1% interest?

Does it matter what bank i get a savings account with? I figure I could just take like 150 a week and put it into savings thus forcing me to not spend money, not that I know where the hell it all goes anyway. Oh wait, I get taxed like 130 a week, thanks gov!
Click to expand...
You're saying you are being taxed at a rate of 21%? I don't buy it.
Click to expand...

Yeah, 37.5 hours x 16/hour and the amount auto deposited each week is 471 bucks.
Click to expand...

State tax, federal tax, social security, medicare, 401k?
Click to expand...

pimpin aint easy
 
Originally posted by: her209
You're saying you are being taxed at a rate of 21%? I don't buy it.
Click to expand...
Federal income tax for someone at his level should be roughly 8%. State will be roughly 3% (depending on state and I'm too lazy to look it up). SS/Medicare will be 7.6%. Total 18.6%. It seems that he is having a bit too much withheld a month (adjustable with the W-4 form), but 21% isn't that unreasonable. Most people forget state taxes and payroll taxes when discussing taxes.

 
Originally posted by: SonnyDaze
Originally posted by: mundane
When the rates are higher, it does serve a purpose.
Click to expand...

This.
Click to expand...

Historically rates are higher. Personally I use a super saver account that gets about 2.5% interest for the last 5 years. I'll continue this until the economy and market stabilizes.
 
Well, when the interest rates on checking and savings are the same, I don't see any point in having one.

That being said, there's online high yield savings accounts that pay about 1.8% right now (they used to pay 5% and will go up again), and that blows away the 0% to .5% you see on most checking accounts.

That interest rate makes a big difference, esp as you save more and more money. Would you rather make $50 bucks a month interest or $0?
 
People don't save for interest, they save to pool their money. In your way of thinking, you would rather keep your money so it's easily accessible and easy to spend (ie- waste) + earn 0% on it.
 
Originally posted by: Fritzo
People don't save for interest, they save to pool their money. In your way of thinking, you would rather keep your money so it's easily accessible and easy to spend (ie- waste) + earn 0% on it.
Click to expand...

these days with real time transfers, having it in savings it's just as easily accessable as in checking. Of course people save to accumulate wealth, but I see no point in using savings accounts if they don't pay interest.
 
A savings account is money that will be there should something come up that will cost a lot of money. It's a buffer against the real world.

It's an account you shouldn't touch. $300 a month goes into my savings account automatically. Emergency funds. It's good to know that if I suddenly need $500 out of nowhere, it's not a problem.
 
Not too long ago my sister's bank accounts were compromised and she couldn't get to any money. Several bills were coming due, including a mortgage payment, and her bank hadn't straightened her accounts out yet.

I was able to help her with no sweat.
 
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