Saving money can be difficult when you have daily wants and needs, but what are you going to do in a crisis or emergency? Taking out a loan, using a credit card or borrowing money from your friends should only be a last resort. If you have a good emergency fund or savings, you can relax and pull yourself out of any financial crisis.
Saving money is like a habit – it starts slow. Savings can help you pursue your dream, start a new career or business, and keep you afloat.
Not so long ago, most of us interacted with a bank through a savings account, and needed approval from an existing account holder to open an account. Today we have many possibilities, and opening a savings account is easier. After the Reserve Bank of India (RBI) deregulated interest rates on savings accounts, banks and digital banks started offering generous interest rates on deposits.
In short, you can do more with today’s savings accounts.
What is a savings account?
A savings account allows you to save your money.
You don’t need to hoard money in your safe or locker with a savings account and it stays safe with the bank. It is also one of the liquid investments, easy to withdraw when you need it.
Although some savings accounts may have restrictions on when you can withdraw money, they are often flexible for goal-based savings. They’re a good choice if you’re planning to build an emergency fund, go on a dream vacation, or buy a car or gadget.
Today, you can also sign up for an online savings account. These accounts promise you high interest rates and are faster than traditional savings accounts.
A savings account also helps you pay your bills and utilities and even make investments.
Overall, a savings account protects your money and gives you convenient ways to spend or grow that money.
And since it’s not the 90s anymore, anyone can open a savings account.
Types of savings account
There are many types of savings accounts and each of them has a particular job to do and offers various benefits.
- Regular savings account: This is your usual account which earns you interest on the amount deposited. Although there is a withdrawal limit.
- Salary account – This account has no minimum balance requirement and will not earn you any interest. It is converted into a savings account if your salary is not credited for at least three months.
- Women’s savings account: These are specially designed for women entrepreneurs who offer lower interest on loans and get all the benefits of a normal savings account.
- Children’s savings account – This is to encourage children to save, this account has a zero balance requirement and the same benefits as a normal savings account.
- Savings account for seniors – Used by seniors to manage their retirement and savings. It also comes with special benefits such as high interest rates for deposits.
How does a savings account work?
Banks mainly earn by lending money to people. The bank uses your savings account to lend money to others at a higher interest rate than they offer you. However, you can also withdraw your money whenever you want. Let me show you how a savings account works:
- You subscribe to a savings account.
- You deposit money.
- The bank pays you interest according to their rate slab.
- The bank uses your deposit to fund loans to others.
- The bank charges a higher interest rate on the loans.
How to open a savings account?
Any Indian can open a savings account for himself or jointly with someone else. You can visit the bank’s website or its branch to open an account, submit a few know-your-customer (KYC) documents, and complete the application form. That’s it.
Even foreign nationals in India can get a savings account by following the rules mentioned above.
You need the following documents to open a savings account:
- Proof of Identity – Aadhaar Card, Passport and Voter ID.
- Proof of Address – Driving License, Aadhaar Card and Passport.
- A copy of your PAN card.
- Passport size photos.
Benefits of opening a savings account
- First, a savings account keeps your money safe in a secure banking system.
- Interest rates are more stable than other investment options like trading and mutual funds.
- You tend to save more. When saving becomes a habit, you rarely use the money to buy things you don’t need and focus on goal-based spending.
- If you save enough in your savings account, banks will be more than willing to extend credit to you in the form of a personal loan, home loan, car loan, etc.
- With online banking, you can set up automatic deposits and regularly save money each month.
- Thanks to the deregulation of interest rates on savings accounts by the Reserve Bank of India, you can earn interest between 4% and 7% each year on your savings.
- Some special savings accounts offer valuable services and facilities. You can choose an account based on your needs and the average minimum quarterly balance you can maintain.
- Some banks also offer locker discounts if your minimum quarterly balance is above INR 50,000.
- International debit cards, discounts on gold products, and family benefits are some of the benefits you can get from savings accounts.
- You can use your savings account to enroll in the Public Provident Fund scheme.
- You can always choose a zero balance account if you cannot maintain a minimum balance requirement.
- You get reward points for each transaction.
Open multiple savings accounts
You can open so many savings accounts and it can actually help you to have more than one savings account. Here’s why:
- This will help you track your savings and goals more effectively.
- Automatic withdrawal of money from your secondary savings account will prevent you from spending money.
- You will be more responsible and look for different ways to build wealth.
- Multiple accounts mean you’ll have more withdrawal power when you need money.
- Different savings accounts offer unique benefits. You can choose a savings account according to your needs.
Difference between a checking account and a savings account
A checking account and a savings account are very different, even though they may look the same. A savings account is for people who want to save money or build funds for emergencies or goals. A current account is created for daily transactions and is often used as a business account.
Here are the main differences between a checking account and a savings account:
- Designed for regular transactions
- Typically used by businesses, businesses, businesses, etc.
- You will not earn any interest with current accounts
- No limits on transactions
- It helps you save money
- A savings account also helps you earn interest
- You must maintain a minimum balance (depends on banks)
- It is a gateway to other benefits and financial products
What is a zero balance account?
The account name says it all.
Also known as the Basic Savings Bank Deposit Account, the RBI uses these accounts to incentivize Indian citizens to save more. There’s no penalty for not maintaining a minimum balance, and it offers similar benefits to a normal savings account. But there are limits to withdrawing money.
Saving money is born out of habit. Once inside, there is no going back. The easiest way to start saving money is to make a list. Yes, a list of your monthly and annual expenses.
When you want to spend, ask yourself, “Do I need this now?” » Create an environment where you can save successfully, identify the things you don’t need, and live without them.
Go back to the 50-30-20 rule. Essential expenses should be 50% of your income, and expenses related to your habits and interests should be classified as wants and constitute 30% of your income. The remaining 20% or more should be set aside as savings. Adjust your expenses to match the 50-30-20 split of your income.
Pay yourself pocket money to spend and stick to it no matter what, because the savings journey will only yield benefits if you pick up your habits young.