Question: Which Of The Following Statements About Savings Accounts Is False?
Options:
- Savings accounts may require you to maintain a minimum balance to avoid paying a fee
- Savings accounts don’t usually pay interest on the money you deposit
- Savings accounts limit the number of withdrawals that can be made each month
- Savings accounts are best used to store money for longer-term goals
Answer: Savings accounts don’t usually pay interest on the money you deposit
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.
Therefore, when you deposit your money in savings accounts, you get a certain amount credited to your account, depending on the interest rate. This means that the more money that you deposit in your savings account, the more interest you will receive at the end of a fiscal year.
To learn more about savings accounts, read this post till the end.
Contents
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.
Regarding the interest rate, the average interest rate provided by banks is 0.01%. However, there are various banks that offer more than that as well. Reports indicate that fully online banks pay more interest rates (up to 4%) than brick-and-mortar banks. This is because online e-banks do not have to pay any extra money for brick-and-mortar bank branches and the wages of extra employees as well.
Therefore, if you open a savings account with a bank that provides a 4% interest rate, you will earn 4% extra cash at the end of the fiscal year at the final amount you have in the bank. Therefore, if you have stored $1000 in the bank, you will earn an interest of 4% of $1000 = $40. Now you know what the answer to “which of the following statements about savings accounts is false” is?
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 | 0.05% – 3.85% | $0 |
| Bank of America | 0.01% | $100 |
| Chase | 0.01% | $0 |
| PNC Bank | 0.01% | $25 |
| US Bank | 0.01% | $25 |
| Wells Fargo | 0.15% | $25 |
| Capital One | 3.4% | $0 |
| Marcus by Goldman Sachs | 3.75% | $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% | $100 |
| Discover Bank | 3.6% | $0 |
| Ally | 3.6% | $0 |
| SoFi | 4% | $0 |
| Synchrony | 4% | $0 |
| CIBC USA | 4.01% | $1,000 |
| Lending Club | 4.25% | $100 |
| Bask Bank | 4.45% | $0 |
| Bread Savings | 4.5% | $100 |
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.
| 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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