Becoming A Responsible Homeowner

3 Reasons To Open A Personal Savings Account

You may have heard that you should never put all your eggs in one basket. The same is true for your money. If you don't have any savings, you're putting yourself at risk if something unexpected happens.

With a personal savings account, you can set aside some money in case of an emergency. Here are a few reasons why you should open a personal savings account.

To Build Up an Emergency Fund

If you have a savings account, you can regularly deposit money and earn interest on your deposits. The accumulated interest can grow your savings more quickly than if you were keeping the money in your checking account. That would provide you with a large cushion to draw on in an emergency.

Additionally, a personal savings account is separate from your checking account. You can avoid the temptation of dipping into your emergency fund for non-essential expenses. Remember that most personal savings accounts have limited withdrawal options. This arrangement can keep you from tapping into your emergency fund before you need to.

By following these simple tips, you can quickly build up a healthy emergency fund that will give you peace of mind in case of a financial emergency.

To Lower Your Dependency on Credit

A personal savings account can decrease your dependency on credit. It allows you set money aside for unexpected expenses, so you're not as tempted to put those charges on a credit card. In doing so, you avoid paying interest on those charges.

A personal savings account can also help you avoid using credit to make large purchases that you may not be able to afford. If you make major purchases on credit, you may pay more in the long run if you're charged interest.

Keep in mind that a personal savings account can help improve your credit score. That's because part of your credit score could be determined by your credit utilization ratio, which is the amount of your available credit divided by the total amount of credit available to you.

Having a personal savings account can help increase the amount of credit available to you, which in turn can help improve your credit utilization ratio and your credit score.

To Reach Your Financial Goals

A personal savings account can also help you to reach your financial goals. Whether you're saving for a down payment on a house, a new car, or a dream vacation, a personal savings account can help you reach your goal more quickly.

By setting aside money each month into a savings account specifically for your goal, you can make sure you stay on track and make progress towards your goal. You could even set up a personal savings account with a specific goal, such as a down payment or vacation fund. In doing so, you can stay focused on your goal and make headway towards achieving it.