Money and Saving, Essay Example

Introduction

Many people think that the safest place for their savings is at home, however, this is not always the case. There are many advantages of opening a savings account and trusting banks with our hard earned money. The author would like to argue that – while there are some disadvantages of putting savings in the bank – the best way of keeping your hard earned money safe without it losing its value.

Advantages Of Keeping Your Money In The Bank

First of all, it is important to mention the FDIC insurance that is provided for all customers of U.S. banks. The Federal Bank guarantees your savings, therefore, in case anything happens to the financial system, you can still get your savings back. The  same insurance is not provided for cash at home, and for insurance purposes it is hard to prove that at the time of the robbery or fire you actually had your notes in the house. If your house gets robbed, you are not likely to get your money back at all, no matter how good your home insurance is. If the bank gets robbed, your savings are still safe.

The second benefit of having your money in the bank is that you will earn interest  on the savings, adjusted to the level of inflation (Wang, para 3). If the inflation in a year is around  3.5 percent, it means that the money you saved during the period of 12 months will only be worth 96.5 percent of its original value. This means that you will end up losing money, instead of earning interest above the inflation.

According to the GreenBook, there are other, long term benefits of keeping our savings in the bank, as well. Those with a saving account on their name will be regarded as good customers, and will be more likely to secure loans or financial agreements. Having a savings account helps banks determine how good a customer one is, and nobody can prove their savings exist under the pillow.

Potential Disadvantages of Keeping The Money In The Bank

Banks keep on changing terms and conditions of savings accounts on a regular basis, and it is hard to keep updated. They might reduce the interest rate suddenly. Further, those with a substantial amount of saving might need to pay tax on the earned interest, and this will reduce their benefits. Savers can have limited control over their savings, and some accounts that pay higher interest do not allow customers to dip into their money for a fixed amount of time.

People who do not trust banks at all might not want to keep their money in there. An alternative would be to invest into valuable items and keep them in safe deposit boxes.

Conclusion

When compared with keeping money at home, it is evident that opening a saving account can be a better solution. Customers are not vulnerable to the changes of the financial market, and their money is protected by the government. Physical money can easily be stolen or destroyed, while that kept in the money is relatively safe. Savers earn interest on their money, while those who keep it hidden at home do not, and their savings can lose its value. While not perfect for retirement planning, as the money does not grow fast enough, having a saving account is both safe and profitable long term.

Works Cited

The Green Book “Advantages of Saving Money in Banks” 2012. Web.

Wang, J. “6 Reasons to Keep Your Money in the Bank” US News. 2010. Web.