A savings account is the most basic of all financial products that a bank or any other financial institution offers. It is a secure way of storing money while earning interest in addition to allowing easy access to the money when needed. Whether you are just starting in your financial journey or looking for a safe place to park your nest egg, it is very important to know how savings accounts work.
Below, we shall focus on the main things to know about savings accounts, their features, benefits, types, and how one can choose the right account for their needs.
1. What is a Savings Account?
Basically, a savings account is a deposit account at the bank that gives a certain small interest rate on the funds so deposited. Compared with fixed deposits or other kinds of long-term investment, savings accounts are high in liquidity, which means you may withdraw money from it at any time if you want to use it without penalty.
2. Key Features of Savings Accounts
- Interest Earnings: Most of the savings accounts would bear interest against the amount one deposits. Again, these differ from bank to bank and the type of savings account.
- Liquidity: The savings accounts are highly liquid as one can withdraw the money at any point in time through an ATM or by logging and transferring it online or by visiting the branch.
- Safety: The risk factor is low in a savings account since the principal amount invested is normally insured through deposit insurance schemes, such as the Deposit Insurance and Credit Guarantee Corporation, in India, up to a certain limit.
- Minimum Balance Requirements: Some of the savings accounts require you to maintain a minimum balance to avoid penalties. Many banks also have zero-balance savings accounts, though.
- Easy Access: In the era of e-banking, there are options for online banking, mobile applications, and ATMs to access and manage one’s savings account.
3. Types of Savings Accounts
- Regular Savings Account: Most common type of saving account that comes with basic features like interest earning, easy access, and cheque book facility.
- Salary Account: This is a special type of savings account where your employer credits your salary. There is usually no requirement for a minimum balance in these types of accounts if the salary is getting regularly credited.
- Women’s Savings Account: This category of savings account specifically targets women. Most of the time, it has added advantages like, loan discounts, and other offers exclusively designed for women.
- Kids’ Savings Account: These accounts are opened by the parents or guardians of children to teach them to save from a very young age. They have features like low minimum balance and parental control.
4. Advantages of a Savings Account
- Security: Savings accounts are a very secure way of keeping money, and it is insured by deposit insurance and through the financial standing of the bank.
- Flexibility: Depositing or withdrawing money can be done at any instance and is without any restriction, hence making your management of money very easy.
- Bill Payments and Transfers: You can pay bills, transfer funds, and make online purchases or through mobile banking.
5. How to Choose the Right Savings Account?
- Interest Rates: Compare the various savings account interest rates that different banks offer. Even a slight difference can make a lot of difference in your savings over some time.
- Fees and Charges: Look out for any hidden fees, such as maintenance charges, fees for withdrawing from ATMs, or penalties for not maintaining the minimum balance.
- Bank Reputation: Go for a bank that is stable in terms of finance and has good, customer-centric services.
- Added Features: Look for added features like mobile banking and insurance benefits that might add value to your savings account.
6. How to Open a Savings Account?
Opening a savings account is pretty easy. Here’s how you get started:
- Bank Selection: You want to choose the bank that best fits your needs regarding interest rates, accessibility, and other services.
- Application Filling: You can apply for a savings account online or go to the bank branch to fill out the application form.
Conclusion
A savings account is a multi-purpose financial tool that will give you security, liquidity, and a small earning of interest. Be it saving for some purpose in the short term or building up an emergency fund to fall back upon for support with your regular income, the right kind of savings account will help you meet such goals easily. You can make an informed decision if you know the features, benefits, and types of savings accounts available, thus aligning it with your personal finance strategy.
Want to have a savings account? Go for products offered by AU Small Finance Bank if you want to avail competitive interest rates and a wide basket of products to suit diverse financial needs and goals.
