MSpA

Morgan Stanley Dep Shs repstg 1/1000 Pfd Ser A

19.5800
USD
1.71%
19.5800
USD
1.71%
18.4400 25.5500
52 weeks
52 weeks

Mkt Cap 783.20M

Shares Out 40.00M

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You'll Never Get Rich With a Savings Account. Here's Why You Need One Anyway

There's a reason you need to be careful about keeping too much money in a savings account. Over time, the value of your money could erode if you keep it tucked away in savings. That's because savings accounts don't tend to pay very generous amounts of interest. In fact, even high-yield savings accounts today are paying roughly 0.60% to 0.70% interest. That's hardly a lot considering that if you were to invest your money instead, you might generate returns that are 10 times that high -- and those returns would still be a bit below the stock market's average. But while it's clear a savings account won't make you rich, it's important to keep one open -- and well-funded -- at all times. Here's why. You need cash on hand for emergencies You never know when life might throw a curveball your way. You might think your job is secure only to get laid off when your company opts to downsize. Or, you might get sick or hurt and end up with thousands of dollars in medical bills. Without money in an emergency fund, you might struggle financially during a scenario like that and suffer a host of unwanted consequences. But if you have cash reserves to tap, you'll have a much easier time getting through a financial crisis. In fact, as a general rule, it's a good idea to sock away enough money in savings to cover at least three months of essential bills. For better protection, you'll want to aim for six months' worth. Now you may be thinking, "Can't I just invest my money in a brokerage account and tap it when a need for cash arises?" And the answer is, you could, but that may not be a route you want to take. You can't discount the possibility of needing money in a pinch at the precise moment your investment portfolio loses value. In that case, raiding your brokerage account would mean locking in guaranteed losses (whereas often, if you leave your portfolio alone during a market downturn, it will recover in time and you won't lose a cent). On the other hand, with a savings account, you never have to worry about losing out on principal. If you put $10,000 in the bank, your balance will be worth $10,000 (more, if interest has accrued), no matter the timing of when you need to take a withdrawal. Protect yourself It's a good idea to invest money beyond what you need to keep on hand for emergencies. But make sure to keep a modest amount of cash in a savings account at all times. Doing so could help you ride out a storm the next time life throws you an unwanted financial surprise. Now this isn't to say you have to settle for any old savings account rate. Rather, do your research. If you're not thrilled with what your bank pays in interest, see if there's a better rate out there (if you bank at a brick-and-mortar institution, you may find that moving to an online bank will give you access to a higher interest rate). But no matter what, don't leave yourself without savings -- frustrating as it may be to see what minimal interest you're earning on your cash. These savings accounts are FDIC insured and could earn you up to 12x your bank Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2022. We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

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