Making our hard-earned cash work for us is key to making the most of our salary.
Making your money earn money is a crucial way to make your savings grow and your income go that little bit further.
However, some means of putting money into savings are not as effective as others. In fact, some may understandably ask, can you lose your money in a savings account? The short answer is yes, but it’s good to understand why so as to mitigate against instances of this happening.
In this guide, we look at why you can lose money in a savings account as well as fully explaining what a savings account is. In doing so, you’ll be able to pick a savings account if it is a suitable financial product for you. Everyone has different needs and requirements when it comes to their financial health, so not every savings account or product will be suitable for all individuals.
What is a savings account?
A savings account is a product offered by financial institutions. Such accounts allow individuals to put money away with that provider. Savings accounts differ from checking accounts in that account holders usually put money into them with very little intention of touching the cash for everyday uses.
What are the characteristics of a savings account?
A savings account will usually exhibit the following characteristics, though they will vary from product to product. Fully understanding each characteristic is vital, so can you pick the right one, if indeed a savings account is something suitable for your needs.
- Interest rate
Savings accounts come with an interest rate that you earn on what you put away in the account. Some savings rates will be higher than others. Usually, the higher the interest rate the more restrictive other characteristics are which we discuss below. Lower interest rates are often offered with a more flexible product. With Cashero our average high yield account offers up to 5%, industry leading rate, plus no monthly fees.
- Investment amount
Some savings accounts will have a minimum deposit amount when opening the account. Some may be so high that they are not an option for people with little cash to put away. Others will be much lower, but may well offer a lower interest rate as a result.
- Maturity date
Most savings accounts will often offer the initial advertised interest rate for so long. After that time, sometimes a year or longer, the provider will likely lower the interest rate on the account automatically. It’s one of the reasons you really need to keep tabs on where your money is and how much you have in accounts. We do things differently at Cashero, you’ll always see the rate you’re getting directly on the homepage in the app – there’s no promotional period that suddenly gets cut off.
- Limited access
Some savings accounts will limit the amount of access an account holder has to the funds put away. The pay off, particularly with accounts with very limited access, is a higher interest rate. Should account holders want to access their funds, they can do but will often incur financial penalties. Those penalties will either be a much lower or no interest earned on the funds saved, or having to pay to access the cash. The result of the latter is receiving less back than the initial amount saved.
You need to bear in mind how long your limited access is for and whether you can afford to put your cash away for that length of time. If you can’t, there is little point in putting your money in a limited access savings account.
Cashero’s high yield account lets you access your money whenever you want it.
Anytime.
Can you lose your money in a savings account?
Given that savings accounts are often advertised to people by offering interest on what is invested in them, how is it possible to lose money in a savings account?
There will be a couple of reasons at play here.
Firstly, any fees that a bank or financial institution can charge on opening a savings account. Not all providers will charge such fees, but they can, and do happen. If you don’t earn much interest on your account or you don’t regularly make contributions to it, it could be that your money gets eaten away by these fees.
Secondly, inflation has a huge impact on what you truly earn from a savings account. It could be that you put your money in a savings account with an interest rate that is lower than the rate of inflation. If that is the case, you will be losing money on your savings account funds. The reason being is that you will be able to buy less with the final investment amount than you could when you first opened the account.
Bearing these issues in mind, along with the characteristics of a particular savings account, is key when choosing whether a savings account is suitable for you or not.
Content Disclaimer:
As of the date of publication, the information contained on this page is deemed to be factually accurate for all terms of conditions, features, and fees. Changes made to Cashero’s terms of conditions, features, or fees after the publication of this content may not be accounted for.
App Disclaimer:
The Cashero App is now available for download in both the Apple App Store and Google Play Store, though not all features are currently functional. Cashero has not yet officially launched.
