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Is Save Now Buy Later better than traditional Savings Accounts?

Last updated :
March 10, 2024
/

minutes read

"Save Now, Buy Later" and traditional savings accounts are two different approaches to saving money.

SNBL is growing in popularity as it provides an alternative to traditional savings accounts. Usually, you have to put a lot of money into a traditional savings account up front and then earn interest on it over time.

With SNBL, you can make smaller deposits over a longer period of time and still earn interest.

Here are some of the key differences between the two:

  • Purpose: The primary purpose of a traditional savings account is to earn interest on your savings, while the primary purpose of the "Save Now, Buy Later" approach is to save for a specific purchase.
  • Flexibility: With a traditional savings account, you can withdraw your money at any time without penalty, while with "Save Now, Buy Later,"  you're saving up for a specific purchase and may have to wait until you have enough money to make the purchase.
  • Interest rates: Traditional savings accounts typically offer low interest rates, while with "Save Now, Buy Later,"  you can earn a higher rate of return by investing your savings in a higher-yielding account or investment.
  • Inflation risk: Inflation can erode the purchasing power of your savings over time, but with "Save Now, Buy Later,"  you're aiming to save a specific amount for a specific purchase, so inflation may not be as much of a concern.
  • Discipline: The "Save Now, Buy Later" approach requires more discipline and planning than a traditional savings account, as you need to save up a specific amount for a specific purchase.
  • Motivation: With "Save Now, Buy Later,"  you have a specific goal in mind, which can be motivating and help you stay on track with your savings. With a traditional savings account, the goal may not be as clear, which can make it harder to stay motivated.
  • Higher Returns: The "Save Now, Buy Later" approach can offer higher returns, as the money is invested for a specific period of time for a specific purchase. In contrast, traditional savings accounts typically offer lower returns.

Ultimately, the choice between "Save Now, Buy Later" and a traditional savings account depends on your financial goals and preferences. If you have a specific purchase in mind and want to save for it, the "Save Now, Buy Later" approach may be more effective. If you're looking to earn a return on your savings and want more flexibility, a traditional savings account may be a better fit.

Pros and Cons of Save Now Buy Later Compared to Traditional Savings Accounts

The main advantage of SNBL over traditional savings accounts is that you can save money over a longer period of time without having to make a large upfront deposit.

SNBL also allows you to put away money for long-term goals, such as retirement or a home purchase. The main disadvantage of SNBL is that the interest rate is typically lower than a traditional savings account. Also, SNBL will not protect your savings from inflation or market fluctuations.

Pros of Save Now Buy Later:

  • Clear goal: The "Save Now Buy Later" approach has a specific goal in mind, which can be motivating and help you stay on track with your savings.
  • Higher returns: By investing your savings in a higher-yielding account or investment, you can potentially earn a higher rate of return than with a traditional savings account.
  • Disciplined savings: The "Save Now Buy Later" approach requires more discipline and planning, which can help you develop good savings habits and financial discipline.
  • Fewer withdrawal temptations: Because you're saving up for a specific purchase, you're less likely to be tempted to withdraw the money for other purposes.

Cons of Save Now Buy Later:

  • Less flexible: With "Save Now Buy Later", you're saving up for a specific purchase and may have to wait until you have enough money to make the purchase. With a traditional savings account, you can withdraw your money at any time.
  • Opportunity cost: By saving for a specific purchase, you may miss out on other investment opportunities that could provide a higher return on your money.
  • Delayed gratification: It can be difficult to stick to a savings plan and wait to make a purchase, especially if it is something you really want.
  • Inflation risk: Inflation can erode the purchasing power of your savings over time, which can be a concern if you're saving for a long period of time.

Pros of Traditional Savings Accounts:

  • Flexibility: With a traditional savings account, you can withdraw your money at any time without penalty.
  • Safety: Savings accounts are generally considered safe and low-risk, which can be a reassuring option for those who are risk-averse.
  • Low minimums: Traditional savings accounts typically have low minimum deposit requirements, making them accessible to a wide range of savers.

Cons of Traditional Savings Accounts:

  • Low returns: Savings accounts typically offer low interest rates, which may not keep up with inflation or provide a high return on your savings.
  • Lack of motivation: Traditional savings accounts don't have a specific goal in mind, which can make it harder to stay motivated to save.
  • Temptation to withdraw: With easy access to your savings, it can be tempting to withdraw the money for non-essential purchases.
  • No investment opportunities: Savings accounts don't provide investment opportunities, which means you may miss out on potential returns from other investment options.

Ultimately, the choice between the "Save Now Buy Later" approach and a traditional savings account depends on your personal financial goals, risk tolerance, and savings habits.

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Shuaib Azam
Shuaib is a Marketing & Growth lead at Hubble. When he isn't working on growth initiatives, Shuaib writes fiction and doodles space monkeys.

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