Many people choose to have a savings account but there are some people that do not. There are actually many advantages to having a savings account and it is worth knowing what these are so that you can make sure that you are making the right decision when considering not having one.
Getting interest
Many people are encouraged to save money because they get paid for doing so. When you put money in the bank or building society into a savings account, they will pay you interest on it. This means that you will get more than if you kept it at home or spent it. Interest rates are very low at the moment and that could be putting some people off from putting money into savings accounts. However, although instant access accounts tend to pay very small amounts, if you are prepared to tie your money up, then you can get higher interest, perhaps by putting it into a bond where you will get a bonus if you leave it in there for a certain period or an account where you have to give notice to withdraw the money, where you will also get rewarded with high interest percentages. It is worth remembering though that every bit of interest that you get is better than nothing. If the money is spent on items that are losing value or sitting in your home, it will not be making anything at all.
Money is safe
Most banks and building societies in the UK are covered by government legislation which means that if they go out of business you will get your money back. You can ask about this at the place that you are looking to use. This can act as reassurance to some people as they may be cautious as in the past people have lost money when they have got it saved in banks that went out of business.
Having money at home is not as secure. If someone breaks into your home and steals it then unless you have it insured, you will not be able to get it back. If someone you let into your home takes it, then you will not be able to claim on the insurance so you will not get it back unless they return in to you.
Harder to spend
If your money is in the bank then it will be harder to spend it. You have to go through the hassle of going into the branch and drawing out the cash or transferring it into your current account and that means that you have to make quite an effort. Due to this, you might question whether it is worth the bother and it could mean that you will therefore be less likely to spend it. If you keep it in your purse, wallet or at home, you will see it there and if you need some money you may just grab it and spend it. You might even spend it by mistake; forgetting that it was money that you were supposed to be saving. Once it is in a savings account, it is locked away as a reminder of your goal and you will be unlikely to forget why you put it in there. Even if you are saving just for peace of mind to have a back up it is better to have the money somewhere separate so that you know that it will not be accidently spent. It is worth remembering though that many savings accounts do have instant access. This means that if you suddenly need the money then you will be able to get to it when you want it. This means that you can get it right away and so although it is harder to get than the money in your current account, as you are less likely to be able to withdraw it form an ATM, you will still be able to get to it if you need it quickly for an emergency or something like that.
Have a back up
It can be really useful having some money in an account as a backup in case you need it. Knowing you have some savings behind you can give you peace of mind and it means that if you are in an emergency situation and you need money, it will be available there to help you. If you just keep the money in your current account then it will be easier to spend. You will see it there when you get a balance at the ATM and it could influence you to draw out a bit more. You may also just spend a bit more generally as you know that you can afford it. By putting it into a separate account you will be able to budget with just what you have left and this will mean that you do not accidently spend it.