What is a daily or saving account?
For most people, the classic savings book or daily account is still the most frequently used form of saving. We often have such an account through our bank at a young age.
In banking, a daily account is an interest-bearing account without a fixed term that is used exclusively for investing money and the account holder can dispose of any amount of the account balance on a daily basis. The interest rate is based on the interest rates of the respective central bank. In Europe, for example, this is the ECB.
Like demand deposits, daily accounts are payable daily, but unlike demand deposits, they are used exclusively for investing money and always earn interest. Credit interest is credited at certain intervals (end of quarter or end of year), the interest rate is – in contrast to a time deposit – not fixed for a certain period of time, but changes as a variable interest rate based on current market developments. The account is managed purely as a credit account and cannot be overdrawn. It is also not intended for general payment transactions.
Long before the collapse of the Lehman Brothers investment bank and the resulting financial crisis, call money accounts and savings accounts still offered an interest rate that could at least compensate for inflation. In today’s world, you’d be lucky not to be charged negative interest. The range here is from minus 0.5% to plus 1.25%.
Prospective investors who are looking for very little risk invest their capital here. Most people are aware that the capital decreases from year to year, even if only very slightly. Nevertheless, it makes little sense to name an investment period here.
This investment option is mainly chosen by young people. Fixed-term deposits are still very popular for the older and more security-conscious. For some, the possibility of always having their existing assets at hand is an important factor of security and flexibility. Nevertheless, it must be mentioned that this investment option has different effects and risks in many countries.
UP TO ANNUAL R.O.I.
Saving & Daily Accounts
MINIMUM BALANCE REQUIREMENT
LOW INTEREST RATES
ACCESS & AVAILABILITY
LOCK-IN PERIOD (DAILY ACC)
Most savings accounts have minimum balance requirements or monthly maintenance fees. If your savings account falls below the minimum balance requirement, the bank will deduct fees from your account, negating from interests you earned.
Interest rates are lower compared to other types of accounts or investments, such as money market accounts or certificate of deposits (CD). As already mentioned, the banks follow the central banks here in order to pay interest on the products.
Yes, we know that this also falls into the category of benefits, but if one finds the easy access to these funds too much of a temptation, then this could make long-term saving difficult, as only low interest rates or negative interest rates are charged here.
If a savings account does not offer a competitive interest rate, inflation could eat away at the value of the interest earnings, making the account balance worth less in one year than it is in today’s EUR. The laws of the market economy simply take effect here, and not all banks offer inflation compensation.
Most traditional banks or credit unions compound your savings account interest monthly, or even annually. This means the full potential of your money isn’t always realized, especially when compared to other investment opportunities.
Savers are bound to a certain period of time with this product. You can usually close the saving account earlier, but then you usually lose the return.
Saving & Daily Accounts
ACCESS & AVAILABILITY
NO LOCK-IN PERIOD (SAVING ACC)
Savings accounts are easy to open and you can withdraw and deposit money anytime (within federal limits) at ATMs or via 24-hour, online access, unlike long-term investment accounts. Many institutions will allow you to link your savings account to other accounts, like a checking account, which can help you to avoid costly overdraw fees. This also allows you to quickly transfer funds from one account to another.
A savings account at a bank that is a member of FDIC, (Federal Deposit Insurance Corporation) insures your money for up to $250,000. If you use a credit union covered by NCUA insurance, your account is also covered up to $250,000. It’s a liquid asset. Savings accounts deal in cash, which means you don’t have to worry about selling investments or making other complicated moves to access your money.
Savers are not bound for a certain period of time with this product. You can change the savings account as often as you like. This provides additional flexibility and allows you to react more quickly to changes in the cost of this product.
A personal note
In our view, daily accounts, time deposit accounts and savings accounts are out of fashion and are usually no longer suitable as an investment product. As a client, you should always compare the fees with the possible interest gain in order to see if there is any capital growth at all. As a second step, we recommend that you take a look at the official and unofficial inflation of the value of money.
With an annual income of €50,000 and an inflation of +/- 3%, you already have a loss of purchasing power of €1,500 every year. Which is already a nice holiday for some people.
However, you still need accounts, so we have listed some of the most popular banks and fringe providers below.
LINKS, PARTNER & PRODUCTS
In the following section, we would like to introduce partners, products and links to providers with whom we or trusted people have had good experiences and who offer sometimes unusual solutions.
From some of the companies listed here we receive a commission. AF-Intermediary is not allowed to give investment advice. All actions are your personal responsibility.
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