Saving money in banks is very common and the probability that you’re already doing it is very high compared to saving all your money at home.
But if you’re just starting to save money and wondering if you should go with banks rather than home, then you have to know the advantages and disadvantages of saving your money in the bank.
There are 11 advantages and 6 disadvantages of keeping your money in the bank, and obviously the pros outweigh the cons that you still can do something to fix them. Although you may choose saving in the bank, you should also know that saving at home is needed as described below
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Advantages and reasons why to save in a bank
Saving in banks have 11 benefits that add value to your savings and help you avoid few mistakes that hinder your money saving progress
One of the obvious advantages of saving your money in banks is the security level you have over your money. It’s the cornerstone of the banking industry.
Saving elsewhere might not be secured or not as secured as when you do it in the bank.
2- availability and convenience
Thanks to the ATM machines distributed all over the place, you can withdraw your money anytime, anywhere in the whole world.
The best thing is, you don’t have to carry it all with you, the bank will do that for you. You just hold on to your debit or credit card that you’ll use to withdraw money.
3- Gaining money
This is, in my opinion, the main advantage that you could benefit from if you chose banks for saving your money. I know that the literal purpose of saving money is to keep adding to it, but why can’t we grow it too?
Using the banks to save your money will give you money in two ways:
3.1 Having more money
Banks give you a compound interest over your money you keep with them. This interest varies according to how you’re going to save your money.
You can do it in a saving account, or a certificate of deposits, and each have even more types that you can go with, and all have different interests according to their duration or how frequent the interest is.
It’s not a huge interest but it’s a money you can have without doing anything, and it adds over time.
Saving $100 in a saving account or with a certificate of deposit with 12% interest annually means you’ll have $900 in 20 years. It’s not much as I said, but try $100K, which will turn into a million in 20 years.
That’s why I recommend saving money as students. When you start that early, you then have 40 plus years to benefit from the compound interest.
3.2 Protecting your money value
When you do your savings at home, you’re not keeping up to speed with inflation. This means that the money you saved will lose part of its value after a year or so.
This is not the case with saving in banks, mainly due to the interest you gain for the money you save. Most of the times, that interest is more than the inflation rate, so you still have your money value and a little more, and in very few cases, it’s just about the same rate, which is still a benefit since your money value is kept intact.
With using banks to save your money, most federal agencies mandate banks to ensure your money due to lost or damage. Some banks even give you insurance in case of death.
That’s a benefit you can’t have elsewhere if you lost your money due to robbery or damage unless you pay for it yourself while it’s part of the account package in banks.
5- Dealing financially with others is easy
Banks have made using the money very easy for us. In couple of clicks, you can transfer a lot of money to the person you just bought a house from in another part of the world.
You can pay for stuff online in an easy and fast way. You can swipe your card over the cashier’s device and your purchases are done just like that.
The opposite will be having all the money you need to use in your pocket which isn’t logic or convenient for the big stuff.
6- Money is safe
I don’t know where my money is exactly in the bank. It can be physically in a vault or being used in one of their operations, but I definitely know that it’s safe against natural disasters or robbery, for the majority at least.
You can do it at home, but if a major pipe broke, your money is going to be damaged. If the area was hit by a hurricane, then it’s all gone as well.
I get that robbery doesn’t know boundaries, and they go for houses and banks, but it’s easier to rob a house than a bank.
Even if the bank got robbed or destroyed due to a disaster or an ongoing war, you should still be insured as discussed above.
One of the important lessons I learnt from a financial wellbeing session was that it’s always a good idea to save portion of your money in a global bank.
A bank that you can have your money from, from another country if you had to leave yours due to a natural disaster or war like Lebanon or Syria.
7- Normal citizen in the eyes of law
Saving huge money in the bank is considered the normal way nowadays, and doing it otherwise, like saving a lot of money at home, may trigger some red flags on you.
In some countries you may be considered a drug dealer if you stashed a huge amount of money in your house.
8- Can travel anywhere
You’re planning to travel to another country and spend few months in it doing some sightseeing, buying things, enjoying your time, so you want to travel with a lot of money.
Doing it by taking the actual money with you on a place may be rejected, and that’s just in the best-case scenario. You can be in a bad situation where you’ll have to explain that, or even lose the money during that long journey.
With banks, you just travel with your card(s) and that’s it. You withdraw any amount you like when you get to the other country. No suspicion, no inconvenience, no awkward situations.
9- Not limited by space
When it comes to banks, you can save as much as you want. They won’t limit your savings, nor dedicate a limited space for you and charge you for extra spaces you acquire.
Like I said, I’m not a banker myself, but I believe a portion of the money is being kept physically in vaults, and the rest is being used in daily transactions and operations that banks use to gain money and give your that interest we’ve talked about.
10- More prepared to surprises
You’re coming back from work and your wife calls telling you that the cooker is down, and you’ll need to bring down dinner with you. Or that an old friend just dropped by and you’ll have to bring a lot of stuff to cook a good meal.
If your money is kept at the bank, then you have the money you want there, and you stop by the nearest shop in your way home to buy that stuff.
If you’re saving your money at home, then this means you either have an extra cash with you already, or you’ll have to go home, bring money, then get back down again to bring the stuff, which is an extra time and energy wasted.
11- Easy tracking
Also, another main advantage of keeping your money in the bank as tracking your money and extracting reports can be done with few clicks or even through ATM machines in no time.
Disadvantages of saving money in the bank
1- Takes money
The main idea of saving money is to keep adding to the pile and not taking from it. When it comes to saving money in the bank you will have to give money as follows:
There are some fees you’ll have to pay for either during opening the account, or for its maintenance down the road, or for your debit or credit cards renewal, etc.
1.2 Minimum balance
Some banks and some accounts require a minimum balance. This might be a showstopper for many people if that minimum balance is relatively large to them and they don’t have it now.
Banking processes can be overwhelming and exhausting with all the waiting for your turn, signing papers, depositing money if needed, opening accounts, and so on.
Another piece of the processes is the fact that there’s so much to learn in short time when you’re sitting in front of the customer service agent and you sometimes forget to ask important questions or they drop out important information to share with you.
With my last loan that I made for my car, I found out that the loan was having a changing rate not a flat one which resulted in extending my settlement date every time the central bank increased the rates.
I went from having the loan for 60 months as initially agreed to 66 months adding 30K to the loan settlement.
When I called the agent asking why, he said, I thought you knew what the changing rate was. You had very low rates in the beginning and no one knew that the central bank was going to change those rates.
We’ve said that banks have high level security and that’s why it’s a major advantage, but banks are still being robbed and some banks even steal their customers.
Even though it’s not that common and you can be reimbursed through the insurance you have over your money, it’s still worth mentioning.
4- Availability and limitations
Another two faces point is the availability. Yes, it’s one of the advantages as you can have your money anytime anywhere, but sometimes, the anytime anywhere part just fails you because of the following:
4.1 Systems malfunction in ATMs
This can cause frustration if you’re in real need for that money and I’ve seen that couple of times when I worked in the ER. Patients will come in the middle of the night and their family can get the money needed for the admission or even to discharge from ER.
Another problem you might be facing when your bank ATM machine isn’t working is that you have to look for another one which might be little far from you or use another bank ATM’s machine which might cost you for withdrawing from another bank.
4.2 Withdrawal limits
In some banks, or in sometimes, there will be certain limitations for your withdrawal activities. It can be in the maximum withdrawals attempts to be made in a certain time, or for the amount of cash to withdraw each time or both.
This might be troublesome for some if needing to have more than the limited withdrawals can give.
5- Easy to spend
Another downside to having your money almost available to you is increasing the chances of you spending it affecting your savings.
Spending becomes as easy as swiping a card that is attached to your wallet of course, and if you don’t have an effective controlling mechanism, you can go as far as the total balance allows you.
6- Religion / Culture / Conspiracy theory
It’s one of the uncommon disadvantages of saving money in banks, but some people often opt out from choosing banks as their primary place to save money due to some religious, culture, or conspiracy theory concerns about banks.
Should I save ONLY in the bank?
I encourage everyone to have the bank as the primary place for saving your money, and this means you should have a secondary one which is your house.
Your main savings should be done in the bank benefiting from interests, and part of your emergency savings should be at home to be ready for any sudden emergencies.
Best practice maybe is to have 40-50% of that emergency fund at home, and the rest of it along with the other savings in the bank.
You have also to realize that saving in banks is more than just heading to the nearest bank and opening an account. To do it right and optimize your outcome you have to follow a certain process formed of 7 steps that I talk about in detail in this article
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