NuWealth Guide: Why start a savings account?

Investing in the stock market is a good way to grow your wealth, but it comes with risks. So you might be asking yourself why you should open a savings account. Well, a savings account is different, and offers more stability and predictability compared to an investment account like a GIA or ISA.

Regardless of your age, income level, or financial knowledge, there are benefits to saving money, and getting started is much easier than you perhaps might think. 

Here are some of the benefits of opening a savings account that we think constitute good, solid, always-true advice. 

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Reach your future financial goals

A savings account won’t get you to your future financial goals overnight. But what a savings account can do, is give you clarity over direction and purpose. 

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When you can see how much you’ve saved and how much closer you are to your goal, your motivation increases. Using a savings account to reach your financial goals is definitely something you may want to consider.

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Use a savings account for retirement planning

Because your savings are protected by law (always check with your provider on the specifics), using a savings account for retirement planning can be a good idea.

That’s because you’ll earn a defined amount of interest on your savings account each year. Add in the benefits of compounding interest, and if you’re consistent, you could build a decent retirement fund. 

Using a savings account for your retirement fund also allows you the freedom to switch to a different savings account should you find a better interest rate.

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Reducing stress about personal finances

Having all of your money in one place, mixed in with bills, groceries, and other payments, doesn’t help with clarity. Not having savings set aside for an emergency can be really stressful, too.

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And you don’t need to have thousands and thousands set aside in a savings account. Just putting aside whatever you can afford each month into a separate account can be very beneficial to your mental health.

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Avoid debt cycles with a savings account

If you’re already in a debt cycle (i.e. using debt to pay off debt) then a savings account is not what you need. However, avoiding starting a savings account is a very good idea to help you avoid a debt cycle should you find yourself in difficult financial circumstances.

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For example, if your income drops or disappears and you have a costly emergency, without a savings account, you’ll need to borrow money. With a savings account, you can avoid, or at least lessen the blow, of a loss of income or emergency. 

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