Savings Rate: Extra Earnings

2007-03-08 10:33:40

( Financial )



The purpose of a savings account is to set aside your extra or surplus income in a bank to be used for a future need or purpose. Most people save for retirement, for travel, for education, or just as a contingency measure for unexpected emergencies.

WHEN BANKS PAY YOU

In exchange for keeping your money in a bank, these financial institutions will give you interest in the form of savings rate. Savings rate is the interest or profit being earned by your money as it is being kept in the bank. The savings account rates being offered vary somewhat from bank to bank.

Savings rate is also based on the amount you will maintain on the bank; a higher maintaining balance has a high savings rate equivalent. High interest saving account usually means that you will deposit a sizeable sum of money and keep the entire amount in the bank for a fixed period of time.

Banks give you earnings in the form of savings rate because they use the money you save to fund their borrowings and investments. Banks earn money by using the collective savings of their clients as source of capital and they pay you back in savings rate.

EARNING MORE THAN MONEY

Savings rates fluctuate on a regular basis and are dependent on the prevailing economic conditions. High savings rate usually indicates that more people are borrowing money than those who are saving; thus a premium is given to those with disposable money to keep in the bank.

The highest savings rate has been given when the demand for money is at its highest and banks need to encourage personal savings to generate funds to address the market’s need for loans.

If you have the extra cash, it is a more prudent option to open a bank account and start saving. Apart from the savings rate that you earn, you exercise control over your finances and earn responsibility and self-respect.


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