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Andrea Hoehn, a customer service representative at Heritage Bank in Willmar, displays a deposit slip used for a customer's savings account. Since Heritage Bank began offering direct savings accounts that can be electronically managed, customers from 48 states have signed up. Tribune photo by Ron Adams

Despite other options, savings account remains an essential for consumers

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business Willmar, 56201
Willmar Minnesota 2208 Trott Ave. SW / P.O. Box 839 56201

WILLMAR -- Heritage Bank does most of its business at the community banks it owns in rural Minnesota towns such as Willmar and Pennock. But when it began offering direct savings accounts that can be electronically managed, customers from 48 states signed up.

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Behold the enduring power of the savings account.

These days consumers have checking accounts, debit accounts, investment accounts, money market accounts and a host of other options for saving and spending their money. But Nancy Miller doesn't think the traditional savings account will ever go out of style.

"It will always be around and it will always be a rock-solid piece of banking," said Miller, vice president of retail banking at Heritage Bank. "If you need it today, you could go down to the bank and withdraw."

In the years leading up to the recession, American savings accounts took a beating. During the final three months of 2005, the national rate of personal saving was barely 1 percent, as measured by the Bureau of Economic Analysis.

Some observers might have wondered whether savings accounts were starting to lose their relevance.

But the recession seemed to hammer home the importance of having a financial safe haven, said Jim Massee, president of Farmers and Merchants State Bank of Appleton.

"For the most part, there's just as much, if not more, in those accounts than before the recession," he said. "Even though they're not paying much interest, their safety is guaranteed."

Financial experts continue to view the savings account as essential to the consumer.

Although their money can earn more interest in an investment account, it's harder to withdraw funds from one of these accounts if they're suddenly needed, said Pam Haverly, business services representative at Lake Region Bank in New London.

The liquidity "is a big deal," she said.

Having a savings account also gives the owner a tool for keeping these funds separate from a checking account, she said. "It helps the consumer with budgeting. It's still the concept of saving -- saving for a need that comes down the road."

For consumers who don't have an established track record with a bank, opening a savings account is "a wonderful way to start," Miller said.

More than this, there's psychological value in setting aside money in a savings account, Massee said.

"If they put it in savings, the thought is they won't touch that," he said. "If you don't see it, you don't spend it."

At some later point, consumers can always consider other options, Miller said. "Does it still make sense to have the money in savings? Do I have a big enough nest egg? How quickly could I get to the money if I needed it? Diversity is important. You don't want it all in a savings account."

Since the recession, saving has rebounded. The U.S. rate of personal saving stood at 5.5 percent this past November and 5.3 percent in December, some of the highest rates in more than a decade.

Masked within these overall figures, however, are the many people who have no savings at all.

Last week The Harris Poll released the results of an online survey recently conducted among a representative sample of 2,100 consumers. The results: 34 percent had no retirement account and 27 percent had no personal savings. A similar survey conducted just 18 months earlier found 30 percent were without a retirement account and 22 percent had no personal savings.

Many of these people may have been forced to spend down their savings because of unemployment, home foreclosure or other financial difficulties, Miller observed. "When times are good, we need to save for when times get tough," she said. "It's that safety. It's the security."

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