A savings account can be more than just a place to park your money until you need it. It can actually be the foundation of your overall debt management plan. And if you've decided to get out of debt altogether, a savings account can even help you reach your goal.
For starters, you can sign up for an overdraft protection service that links your savings account to your checking account. Since you can't always predict every expense in your budget, it helps you avoid overdrafts and high-interest credit card debt as well.
Another way a savings account can integrate into your debt management plan is starting an emergency fund. And although it may seem counterintuitive, it's actually quite common to start or add to a modest emergency fund (say, $1,000 or so) prior to making extra payments toward debt. The reason is simple: life is full of unexpected expenses.
For instance, if you've made the commitment to reduce debt or even get out of debt but suddenly find yourself facing unplanned auto repairs, your only choice may be to use credit. On the other hand, if you have an emergency fund, you can handle the expense without interrupting your debt management plans.
A separate emergency fund in the form of a savings account puts a specific amount of money away from the rest of your funds, earns interest and can be easily accessed when the need arises. However, savings accounts may also carry withdrawal limitations. These limitations may help encourage you from tapping into your account more than necessary, but it's important you completely understand the details to avoid unnecessary fees or penalties.
At Ally, we offer a number of different ways to save, including the Online Savings Account, which includes a high yield, no minimum deposit to open, no monthly maintenance fees and more. Of course, the Ally Interest Checking Account or even the No Penalty Certificate of Deposit (CD) could also function as your lifeline, so explore your options and make saving money part of your debt management strategy today.