Which of the following statements about savings accounts is FALSE? · Savings accounts don’t usually require a minimum balance. · Savings accounts 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.
The Correct Answer and Explanation is :
The FALSE statement about savings accounts is:
“Savings accounts are best used to store money for longer-term goals.”
Explanation:
Savings accounts are primarily designed for short- to medium-term saving rather than long-term financial goals. Here’s why the other statements are true:
- Savings accounts don’t usually require a minimum balance: Many savings accounts do not require a minimum balance, or if they do, it’s typically low compared to other types of accounts, like checking accounts or investment accounts. However, some banks may offer accounts that require a minimum balance to avoid monthly fees or to earn higher interest rates.
- Savings accounts pay interest on the money you deposit: This is true. One of the primary features of a savings account is that it pays interest, although the interest rate can vary between banks and types of savings accounts. The interest rate is generally lower than what you’d find in investments like stocks or bonds, but it is a secure and safe way to earn a return on your deposits.
- Savings accounts limit the number of withdrawals that can be made each month: This is true, too. Under federal regulations, savings accounts are subject to a limit of six withdrawals per month (under Regulation D). This limitation is meant to encourage saving and discourage frequent transactions, which are more suited to checking accounts.
However, the statement that savings accounts are best used for long-term goals is FALSE. Savings accounts are typically best suited for short-term goals, such as emergency funds or saving for purchases within the next few years. For long-term financial goals, like retirement or investing for growth, other investment vehicles like 401(k)s, IRAs, or stock market investments are usually better options because they offer higher potential returns over time, despite being riskier.
Therefore, savings accounts are best for short-term savings where liquidity and safety are the priority.