Savings Account: Benefits And Different Types Of Savings Account

Banks and NBFCs use savings accounts as significant sources of funding for loans. As a result, savings accounts are available at almost every bank or credit union. This is irrespective of whether they have physical establishments or function online. Savings accounts are also available at several investing and brokerage organisations.

What Is A Savings Account?

A savings account is a deposit account that pays interest. It is held with a bank or other financial institution. These accounts often yield a low-interest rate. However, their safety and stability make them an excellent choice for saving cash for short-term requirements.

Why Do You Need A Savings Account?

A savings account serves as a virtual safe deposit box for your funds. Unlike a Fixed Deposit, however, you can access this money anytime you need it. But that’s only one of the reasons why having a savings account is crucial.

To make and receive payments, pay your credit bills, invest, and so on, you’ll need a Savings Bank Account. Your account can also be used to pay for things like electricity and even mobile phone recharges. You need a Savings Account to protect your money from theft, displacement, and destruction. This is because you can only store or carry a certain amount of cash without feeling anxious.

Also Read: 6 Tips You Can Consider To Save Money In 2022

How Do Savings Accounts Work?

Compound interest is offered by most savings accounts as an incentive to save money. The money you deposit earns interest, which is re-deposited into your account. Interest is earned on the new balance, etc.

You can utilise your savings account to perform the following things:

• Make a cash deposit or withdrawal
• If your bank allows it, you can deposit checks directly into your savings account
• Internal transfers within the bank
• Electronic deposits and withdrawals
• You can have money transferred into your account immediately. However, this can happen if your employer pays you in direct deposit.
• Request a check

Benefits Of A Savings Account

• Savings accounts give you a location to keep your money aside from your regular banking needs. This allows you to set aside funds for a specific aim.
• Savings accounts yield income in addition to keeping your assets safe. Therefore, it’s better to put your unused money in a savings account rather than accumulating cash in your checking account. At the same time, unlike fixed deposits, which levy a penalty if you remove your funds too soon, your access to funds in a savings account will stay highly liquid.
• Having a savings account at the same bank as your primary checking account can provide various advantages. These include convenience and efficiency. Deposits or withdrawals from your checking account to your savings account will take place immediately. This makes it simple to transfer money from your checking account to your savings account. You can collect interest immediately—or the other way if you need to cover a hefty checking transaction.
• Many financial institutions allow you to open numerous savings accounts. This can be useful if you want to track your progress toward multiple goals. For example, you could have one savings account to put money aside for a big trip. And you can have another account to retain cash from your checking account.

Types of Savings accounts

• Traditional Savings Account: The most prevalent type of savings account is a standard savings account. These are available at traditional banks and credit unions. You won’t usually obtain the best savings account rates with this type of account. 
• High-Yield Savings Accounts: If you’re seeking the finest savings account rate, high-yield savings accounts are what they sound like. They are savings accounts with an above-average annual percentage yield. High-yield savings accounts are more common with online banks. However, you can find them at traditional banks and credit unions. Due to their decreased overhead, internet banks may provide cheaper fees in addition to higher rates.
• Money Market Accounts: Money market accounts offer savings and checking accounts benefits. This means you can earn interest on your balance, create checks, etc. You use a debit card to make withdrawals and purchases. Money market accounts may have higher interest rates than traditional savings accounts. But they may be subject to the six-withdrawal-per-month rule. If you want even more convenient access to your assets, consider a money market account.
• Savings Accounts for Children and Students: These accounts normally have an age limit for saving; for example, if you’re 25 or older, you might not be able to open a student account. These accounts are intended to assist children, teenagers, and students in developing savings habits. These accounts aren’t normally designed to compete with high-yield savings accounts in terms of rates. They can, however, pay some interest while teaching children the importance of saving.
• Savings Accounts with Specific Purposes: Some banks provide specialised savings accounts with a certain purpose in mind. For instance, you might be able to open a savings account solely for Diwali or to save for a down payment on a property. These accounts aren’t as prevalent as other types of savings accounts, and they can have limitations. For example, a Diwali savings account may only allow you to withdraw funds once a year during that month, just before the holiday shopping season begins.

Who Can Open A Savings Account?

A Savings Account can be opened by anyone. With an application form and the requisite KYC documents, any Indian can open a Savings Account. They can do so either individually or jointly with another Indian national. While banks require Indian citizenship to open a Savings Bank Account, certain exceptions have been made for foreign nationals who are in the country for an extended period for business or other reasons and need to make or receive payments. These individuals need only provide the required KYC documents with the application form.

How To Open A Savings Account?

To open a savings account, go to one of the bank or credit union’s branches or open one online for those institutions that provide it. Your name, address, and phone number, as well as photo identification, will be required.When you open an account with some institutions, you may be required to make an initial minimum deposit. Others will let you open an account first and then fund it. In either scenario, you can fund your account using a transfer from another institution’s account, an external transfer, a mailed-in or mobile deposit check, or a branch deposit.

Documents Required For Opening A Savings Account

Address proof like a voter ID card, Valid passport, PAN card, permanent driving license, NREGA employment card, Aadhar card, or ID card issued by central or state governments, PSUs, or scheduled commercial banks are to be submitted for opening a savings account. The bank will also require your employment proof and your recent passport-size photographs.

Also Read: Aadhaar Card 101: Everything You Need To Know About It

Final Word

When you want to save money for future requirements and goals, look into a savings account. Savings accounts allow you to put money aside for safekeeping while also earning interest on the sum. These accounts can be opened with a bank or a credit union.

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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.