Low interest rates have made savings accounts appear pretty unattractive. It’s hard to get excited about the prospect of your hard-earned dollars earning a solid one percent, or perhaps even less. The average interest rate on savings accounts is 0.8 percent, according to the FDIC.

But returns aren’t what make savings accounts an attractive option. It’s not as if people are advising you to place your retirement savings or other long-term investment money into a savings account. That’s not why we need them.

Savings accounts provide two things: stability for those funds we can’t afford to place at risk and immediate access to money when we need it. With this in mind, there are a few reasons why you should have a savings account, despite the paltry interest.

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1. An Emergency Fund

People generally accept it’s a good idea to keep three to six months’ worth of expenses available in an emergency fund. This is the money you live off if you lose your job, or need to pay for major car or home repairs or for uncovered emergency medical expenses — pretty much any unforeseen expense that could derail your careful planning.

While we can’t predict what emergency expenses will arise or when, we can be quite certain that one will happen. And the key to avoiding a hit to your financial well-being is to be prepared.

Your emergency fund is your financial life insurance against disaster.

These funds must be whole and available when needed. Any growth or return is only a secondary consideration compared with the objectives of stability and accessibility.

An Opportunity Fund

This aspect of an emergency fund is often overlooked. It’s the primary reason I prefer the term “cash reserve” over “emergency fund.” It doesn’t have to be just for emergencies.

You may have an opportunity to make a planned purchase slightly earlier at significant savings. That might be a good time to borrow from yourself. As long as it isn’t a major portion of your reserve balance, and as long as it’s a short-term payback, this can be a great source of leverage to help you save money on expenses you would incur anyway.

2. Short-Term Goals

As your financial goals get closer to realization, you’ll need to shift from a growth perspective to a safety perspective. If you're planning on buying a home within the next two years, you shouldn’t have your down payment invested in the market.

You shouldn’t assume any risk at all with these funds. They belong in a place where they are accessible and safe, like a savings account.

For goals of two years or less, this will always hold true. For goals three to five years out, it will generally (though not always) hold true. But if you would be unwilling to postpone the goal based on market conditions, then the money belongs in savings.

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3. A Car-Replacement Fund

There really isn’t anything wrong with using a car loan to get a car you need. But say you bought one with a five-year loan. Begin a replacement fund immediately and save what you can, even if it’s just $20. But once you've paid off the five-year loan, put the entire amount of your car payment into this account.

Then when it's time to replace your car, you will have built a significant down payment and should be able to take out a smaller loan. Do this a couple of times, and you’ll end up buying your cars for cash, no loan. But this money should be in savings, not in the market.

4. Vacation Funds

This is a nice, simple, and appropriate use of savings.

If you put one-twelfth of your vacation budget into an account each month, then you can vacation without debt.

Why don’t more people do this? I wish I had the answer. But the account should be stable and accessible — like a savings account, for example.

5. Holiday Funds

It amazes me how much some people spend during the holidays. It amazes me even more that they spend it without having saved it first. This, like the vacation fund, is a no-brainer. If you spend a bit for the holidays, accumulate it in advance. Then you’re good to go. This is a perfect use of a savings account.

6. Accumulation Funds

Once you have your retirement and other financial goals on autopilot, you may find you still have a little left over — especially if you plan properly and live within your means. Accumulating your excess money in a savings account until you earmark it elsewhere provides a lot of convenience and opportunity. Then you can choose what to do with the money without having to worry about the market.

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7. Accrual Account

The accrual account is another one of those no-brainer savings accounts that pretty much everyone should have. We all have expenses that don’t conveniently coincide with the frequency of our paychecks.

For example, car insurance is typically paid semiannually, or else you’re charged a fee to pay it monthly. Homeowners insurance, real estate taxes, vehicle registration — many expenses are periodic and often more than we want to spend out of one paycheck.

But if we put money into an accrual account each pay period to cover these expenses, then we have the funds available when needed. And it can save you money instead of paying an insurance company to bill you monthly.

Again, it’s a short time horizon and most important that the money remains intact. Another perfect candidate for a savings account.

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What’s Changing?

The things we need savings accounts for are staples of sound money management. But how we use them may change. There's no reason you can’t use an online savings account to get a little more interest, as long as your money is still sufficiently accessible.

An online savings account only helps with convenience. And it can open up a lot more options than you might have in your neighborhood.

In some cases, money-market accounts or high-yield checking accounts can serve as savings accounts with a little better return. But beware of potential risk, especially with true money-market accounts — your principal is not guaranteed.

In spite of the proliferation of online options, a local credit union still can work for many people. These institutions often do old-school banking — you’re a person, not a number. Plus, they often pay out slightly better than the banks.

Why Should You Have a Savings Account? The Bottom Line

We still need accounts that offer immediate access to our money, as well as the highest level of safety and stability. Those objectives are more important than return for these specific funds. Having our short-term and emergency money extremely safe frees us to be aggressive with our long-term funds.

The finances haven’t changed. Financial technology may help us do things more conveniently and in simpler ways, but it hasn’t made savings accounts irrelevant. Rather, it has made them more accessible and increased your options. And that’s a win.

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