The answer might be a big resounding yes.
Most people will tell you that saving up money and sticking it to a bank account is one of the best ways to grow your money. And it is. Opening a savings account in a bank is both practical and safe. However, by solely keeping your life savings in a bank account turns out to be more damaging than advantageous. Surprised? See why:
1) Interest Rates
This seemingly advantageous feature of savings account could actually more harmful than helpful. By keeping your money in an account with an interest rate that is less than 1%, in the long run, you might be looking at a deficit. There are many banks and more popping up online that offer more than the 1% standard interest rate. You would just have to look harder and research better. Just make sure these banks are legitimate and real. But a better deal is if you make your money work for you instead of keeping it idle and depreciating somewhere.
2) Not Diversifying
Here’s the deal, saving up is the one of best things you can do with your money. However, it is not the only thing you can do with it. If you put all of your money, every surplus, each unused wage, and extra income into one savings account, you could be sabotaging yourself financially. Savings accounts are good and well but if you just keep it where it is, hoping for the interest to carry you through for the rest of your life then you won’t have much going for you. The best way is to diversify. Put some of your money into your retirement accounts and invest others in stocks and real estate to have higher returns. Keeping your money idle is not ideal. Put it to use and make it work for you.
3) Online Services
We live in the digital age and it is inevitable that one way or another, technology will be involved in banking especially nowadays that smartphones and tablet dominate the world. And as we move into the cyberworld, tasks have been made easier for our convenience. Now, you can transfer money, pay bills, shop, withdraw, and deposit wherever you are. By taking advantage of the convenience offered by technology, you save up on gas, time, and effort. If your bank still has no online portal, then maybe you should consider going to a new one where you get all the perks of the digital age.
4) Fees and Charges
All banks charge fees for their services such as withdrawals, deposits, overdrafts, and low balances. You can even be charged by simply wanting a receipt or using ATM. That’s why it’s important to choose a bank with the best features. Some of them may offer you bigger interest rates and then charge you for every move you make. So instead of saving up and managing your money properly, you are left wondering why your money hasn’t grown in the bank yet. Remedy this immediately by transferring your wealth to somewhere with better deals. The advancement in technology made sure that everyone can afford online money management with minimum fees.
5) Not Having Sub-Accounts
Sometimes simply saving up is not as effective as designating your money in sub-accounts. Designating money into sub-accounts with specific purposes such as house payments, emergency funds, vacation fund, and car fund can significantly increase discipline in your saving habits. These labels will help you restrain from withdrawing funds. Some banks offer sub-accounts for a price while some offer them for free. There are also many online banks that offer these free of charge.
Having a savings account is a good thing but if you’re not careful, it may be doing more damage than good to your financial life.