Many people debate the importance of having a bank account.
Some people ask: why should I save my money in a bank account as opposed to under my bed or in a cash pan? While saving your money at home under your bed or in a cash pan can be convenient to you, saving at a bank can be even better for your current and future financial health.
There are multiple reasons for using a bank account rather than saving your money at home.
The first reason is security.
Banks are equipped with state-of-the-art security systems and are heavily guarded to protect against threats. A home is not normally equipped with such security systems and security personnel.
Secondly, you should place your money in the bank because of insurance. This means, if anything unfortunate happens at the bank (eg institutional collapse) you are entitled to get back up to $125,000, if you have invested that much. However, if your money is stolen or destroyed while it is in your home, it is not insured. If your money is stolen at your home, even if you get it back, you would have had to initially deal with emotional pressure of losing the money.
The third reason to place your money in the bank is because of inflation and interest.
In 1965, a loaf of bread costed $1.10. If you had saved $110 with the intent of buying 100 loaves of bread in 2018 you would only be able to afford 11 loaves of bread—this is what occurs when there is inflation.
However, your money can resist the weight of inflation and adequately grow in the bank through interest. If you put $100 into your bank account every month from now for 53 years with a modest rate of interest, you would have $83,956. If you had saved that money under your bed it would have been $63,700. That is the power of compound interest and it is also the difference between saving your money in a bank rather than your home—and $20,256 is a big difference.
The fourth advantage banking also gives you is convenience.
You can use your bank account to pay all your bills, transfer money into another account without having to go the bank and you can make online purchases. Possessing a bank account can bring the convenience of making financial transactions at home.
Another benefit of owning a bank account is that you can receive direct deposits for payments. Imagine if you were employed with a large company where they paid workers every month, but you had to line up to collect cash payments on a specific day. This would be a cause for concern; especially if there are hundreds of employees working at the company, due to the long lines it would cause, the amount of time it would take, and the general productivity of workers that would be affected. Although you can have easy access to your cash, saving your money at home does not offer the same convenience as using a bank.
The final advantage you can receive from using a bank account is the ability to access credit. If your bank account is well maintained, you can qualify for credit in the form of credit cards or loans in the event you need it for an investment. However, if you do not have a bank account, you would have to borrow money from people. This is risky because these people can ask back for their money at any time whereas, with a bank you have terms and agreements for repayment that are fixed.
There are many advantages of utilizing a bank account rather than saving money at home. It will not only serve you in terms of its ease, but it will protect and multiply your money as well.