Which Of The Following Statements About Savings Accounts Is False?
Question: Which Of The Following Statements About Savings Accounts Is False
Options:
- You can earn the most money using a saving account
- The rate of interest earned from saving accounts is modest
- Reconciliation of your bank statements is very important
Answer: The rate of interest earned from saving accounts is modest
Explanation
“Which of the following statements about savings accounts is false” is a question that appears as a part of the Everfi PF Module 1. Out of the four options above, the option “Savings accounts don’t usually pay interest on the money you deposit” is the correct answer. But why?
This is because a savings account is a type of account that you can open to earn money just by depositing and saving your cash. You make money by opening savings accounts because each bank offers various interest rates credited annually. When in need of money for emergencies, borrowing from a trusted lender is a better option. Consider visiting a licensed money lender in Singapore before opening your first savings account.
To learn more about savings accounts, read this post till the end.
Your savings account is an interest-bearing banking scheme, that can be opened at any bank or Non-banking Finance Companies. This is one of the safest options to saving your money. But the money saved in your savings bank account is for your short-term purposes only.
The interest rate in savings accounts is lower. The reason for the low interest is the convenience and flexibility of withdrawing money from savings account.
Banks use the money saved in the account for loans. So, you will have the option to open a savings account with almost every bank and credit union. Investment and brokerage companies also let you open savings accounts.
You will get interest on the least amount in your savings account on any day, over the stipulated period. But the interest rates for savings accounts in the bank keep fluctuating.
Due to adjustments in the rate of the federal bank’s rate, your bank can change its interest rate too. But have you learnt about the high yielding savings accounts. Some banks can offer a higher interest rate for a minimum dept of 3 to 5 years.
You can earn good interest by investing your money there. So, check out which banks let you open such accounts.
As you have answered, which of the following statements about savings accounts is false, it’s time to get to know in detail.
What Is A Savings Account?
A savings account is a deposit account that you can open with almost every bank out there. Here, the main objective is to store money in a secure place so that you can earn money in return. Therefore, the more you deposit, the more you earn as interest at the end of a fiscal year.
But do banks and other credit unions like Minto Money use your deposited money in any way? Of course, they do!
Whenever you deposit money in a bank, the bank uses the money to provide other people and businesses with loans. When the loan borrowers repay the amount – plus interest – the interest gets added to your account.
Depending on the interest rate provided by each bank or credit union, you will get a certain percentage of money. The rest of the banks’ extra cash from loan borrowers is their profit. This is the most basic way banks cooperate and earn revenue.
In the USA, the average APY at the national level is approximately 0.46%. The Federal Deposit Insurance Corporation declared this rate on 15th April 2024. But there are other American banks, providing greater rates too.
The rate remains unchanged. Compared to that in recent times. The savings accounts with a minimum balance of $2500 enjoy a fixed interest rate. It is approximately 0.24%. The best rate offered in the USA is 5.84% in this case.
Do you need more clarity to understand how banks calculate your savings account interest?
The national average rate of savings accounts is 0.46%. But 0.24% is the least assured rate that you will get in banks in America. Now you know that rate is a modest one. So your answer to “Which Of The Following Statements About Savings Accounts Is False” was correct. Now it is proven.
At a rate of 0.46%, you will get $550 as return against annual savings of $10000.
A few banks also offer compound interest rates in your savings account. The interest can be compounded. it might be daily, quarterly, or monthly. It might be annually too.
The static and common compounding accounts are compounded annually. If you keep about $10000 in one of your savings accounts, the interest that you will get is $4,802.44. Here the rate of compound interest that i have considered is 4%.
However, you need to maintain a minimum account balance to keep your savings account running. You will not be eligible for interest if you own less than the bank’s minimum balance.
However, which savings account will earn you the least money? Which are the best Minnesota credit unions? Here are some interest rates and minimum balances of various banks in the US:
| Bank | Interest Rate | Minimum Balance |
|---|---|---|
| Citi Bank | 0.03% | $0 |
| Bank of America | 0.01% | $100 |
| Chase | 0.01% | $0 |
| PNC Bank | 0.01%–0.03% | $1 |
| US Bank | 0.01% | $300 |
| Wells Fargo | 0.01% | $0 |
| Capital One | 4.25% | $0 |
| Marcus by Goldman Sachs | 4.24% | $0 |
Apart from these brick-and-mortar banks, there are various online banks as well. Here are some interest rates and minimum balances of different online banks in the US:
| Bank | Interest Rate | Minimum Balance |
|---|---|---|
| Alliant Credit Union | 3.10% | $5 |
| Discover Bank | 4.25% | $0 |
| Ally | 4.25% | $0 |
| SoFi | 4.6% | $0 |
| Synchrony | 2.25% | $0 |
| CIBC USA | 0.05% | $0 |
| Lending Club | 5.05% | $0 |
| Bask Bank | 4.97% | $0 |
| Bread Savings | 4.15% | $0 |
How To Open A Savings Account?
You can open a savings account quickly by going to the nearest branch of your chosen bank. Then, ask the receptionist if you wish to open a savings account in this bank. After that, you will be guided through the entire process of doing so.
Typically, you will be requested to present documents verifying your name, address, number, photo, and SSN (Social Security Number).
After this, you will be requested to fill up a form. After you do so, you must submit your photographs to the bank.
Since some banks require you to maintain a minimum balance, you must pay that amount upfront. After you do so, your savings account will be created! Check your mailbox in a few days to receive a package containing your new checkbook, debit card, credit card, and more!
Why Should I Open A Savings Account?
There are various reasons why you should open a savings account. There are also various reasons why do you need a good credit score for the chase sapphire reserve.
First, it takes a few days to set up without too much paperwork. Secondly, you can transfer and withdraw money from your account anytime. While most banks do not have a withdrawal cap, some banks might limit it to a certain amount or number of times each month.
However, regarding the answer to the question “which of the following statements about savings accounts is false,” you earn interest by depositing your money in the bank. Therefore, the more you deposit, the more you can earn!
In addition, your savings account is federally insured. This means that even if your bank goes bankrupt, you will get some back in return.
However, the primary reason a savings account might be disadvantageous for you is that you can statistically earn more money by investing in the share and stock market. Another point is that you have to maintain a minimum balance. If you fail to do so, you must pay a monthly fine.
Moreover, the withdrawals from some banks are limited. However, the Federal Reserve does not impose any limit on your account. The parameter of 6 maximum monthly withdrawals is, however, imposed by some banks. After that, you must pay a token fee for every transaction.
| Pros | Cons |
|---|---|
| It can be set up easilyMoney can be transferred easilyYou can link it with other checking accountsYou can withdraw as much as you likeIf the bank fails, up to $25,000 is federally insured | It pays way less interest compared to treasury bills and stock investmentsYou need to maintain a minimum balance for some savings accounts with specific banks |
Conclusion
The answer to the question “Which Of The Following Statements About Savings Accounts Is False” is “Savings accounts don’t usually pay interest on the money you deposit.”
This is because the whole concept of creating a savings account is to promote savings in people. The more you deposit and save, the more you can earn as interest from the bank.
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