Savings Account has been crucial part of individual for day-to-day investment. Every individual has been a part where they have opened savings account for tracking their savings and increase their wealth over time. But choosing long term savings account is important to overcome the high expenses imposed by bank or financial institutions.
Why Long Term Savings Account?
Every now or then, we hear by our parents and elders why savings is important. To hedge the risk factor and have a stabilized life or in case of any accidental factor we look at our savings to help us out. With this, there comes the need of savings accounts. Most people look for Long Term Savings Account in order to gain maximum interest rate and have most liquid asset so that they can withdraw at any point. We also plan our wedding or some property to acquire through long term savings account.
What is Long Term Savings Account?
Any account that is created for long time goal is known as long term savings account. People have different goals like marriage, vacations or buying a car or home. Apart from this, savings account also ensures that some extra fund is allocated which contribute to our wealth creation. Retirement plans and further education goals are met by long term savings account.
Who should open Long Term Savings Account?
Although, everyone should have long term savings account according to their needs and goals, but certainly the end deposits may vary from person-to-person. People who have just joined any job or profession may have low requirement for savings compared to the person who might be in their 40s. However, early financial planning is always suggested to secure the future prospect of life.
Type of Long Term Savings Account
Since the goal of long term savings account is different, therefore there are many types of long term savings account. This make sure that the each and every goal of the individual is met through such account. This may have different interest rate, investment plan, duration and withdrawal rules. With this, we will discuss the different long term savings account in this section.
High Interest Long Term Savings Account
This type of account offers high returns on investment. The yield is generally higher than traditional savings account due to the duration promised by the investor. Even in this, online bank offers higher yield than offline banks due to less expenditure in offices and manpower. Such accounts met the goals of investors in long term by offering good interest rate.
Retirement Long term Savings Account
As it is clear by name itself, Retirement Long Term Savings Account is created for the purpose of retirement. This is generally opened by employers or people who earn from their regular job and have fixed income for the fixed duration. Such accounts are used once creditor overpasses 60 years and is retired by the current employee.
Certificate on Deposits
These are time bounded accounts. The minimum duration for such accounts are generally 45 days. The bank provide certificate over the deposits and interest varies with the duration. Maximum benefits of such deposits are availed over long duration like 15 years. The interest rate are much higher for such term. Penalties are also imposed if withdrawals are taken before the specified period.
Education Long Term Savings Account
Education is one of the most important prospect of life. Many student and even guardians open education account for higher education. The benefit of such account is that there is no penalty and minimum account balance criteria for such account. Government promotes such account for the students to become independent.
How to Choose Long Term Savings Accounts
Well, there are lot of criteria that must be looked before choosing savings accounts, some of them are mentioned below as a checklist to go through.
- Bank Credibility : Is the bank is trustworthy to invest in long duration and does not have any bad record in terms of withdrawal or services.
- Charges : The annual charges for the maintenance should not be higher compared to other institutions. Also, there should be no hidden charges.
- Interest Rate : This is the most important factor that should never by neglected. Even a 1% interest rate difference can differ the whole wealth by 2 X times in the long run. It is advised to compare the plan and then proceed with the best one.
- Duration : Time frame should be clearly specified and there should be no discrepancies between any of the parties. Also, withdrawal in any emergencies should not impose heavy penalties over the investor.
- Fluctuations : It is quite possible that the interest rate fluctuates in short period of time. But in long course of time, it should give a regular upward returns of investment.
Accessibility of Funds
The benefits of long term savings accounts is that it offers easily accessibility of funds. This makes the funds to be in liquid state and investors could withdraw the fund according to the requirement. However, depending upon the type it imposes different charges and penalties but amount can be withdrawn. If we look at the safety criteria, long term savings account can be counted as the safest type of investment in the long run.
Long Term Savings Account is stated as one of the best investment to accumulate wealth along with interest in the long run. It is said that money kept with you will never make you rich. So, it is wise to remain invested in such accounts in order to get returns from our money itself. But there is so much things to be looked before choosing the account because any small wrong step could affect our long time wealth creation and could back us by few years. Time duration, charges, penalties everything should be learnt first.
Which type of Long Term Saving Account is Best?
Every individual has different requirement and goals, and so account should be chosen on personal basis. However, personal finance advisors should be informed before such action.
Should We Invest In Long Term Savings Account?
Yes, for every individual it is advised to have long term savings account to meet the goals or wants. It also ensures that any emergency is met with such type of savings.
What are different types of Long Term Savings Account?
There are lot of Long Term Savings Account, to name a few : education, retirement, high interest. The motive of all types is different and hence they offer different facilities.