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What Are The Different Types of Saving Accounts?

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Created on
July 9, 2022

Summary

What’s Inside

Imagine a piggy bank that gives you more money than the amount you put in it - that’s what a savings account can do for you. Before you create a savings account from the first bank you find, you should know that there’s more than one type. The more you know about the different types of savings accounts, the more likely you are to find one that suits your needs best. 

Types of Savings Accounts

While the broad characteristics of the different kinds of savings accounts worldwide remain the same, there are hundreds of different iterations of these accounts. The terms of these accounts vary slightly from account to account based on factors like preferential interest rates, lower fees, minimum balance requirements, age groups, gender, and so on. These are some of the best-known savings account types in the world.

1) Regular savings accounts

Regular savings accounts are one of the most widespread and well-known financial instruments in the world. People around the world use them as a means to keep their money safe. They act as a natural hedge against inflation, provided the rate of interest offered on these accounts is higher than the current inflation rate. They also allow users to access various kinds of banking features both offline and digitally in the case of net banking.

2) Joint accounts

A joint savings account functions similarly to a regular savings account. The difference between a joint account and a standard account lies in the fact that it isn't operated by one individual when it comes to the joint account. This means that all parties have access to the funds in this account. All parties may withdraw funds from the account or deposit funds into the account.

3) Zero balance savings accounts

These accounts do not require their users to have any amount of funds in their accounts. As a result, they tend to be popular amongst users who are relatively new to the banking system. Since maintaining a minimum balance is not required, users do not run the risk of incurring penalties. While there are no minimum balance requirements, the bank will still charge other fees like maintenance fees.

4) High-yield savings accounts

High-yield savings accounts are those savings accounts that offer a much higher rate of interest than the average savings account. These types of accounts are more common with online banks and new-age money apps. High-yield accounts are an excellent way to grow your money over time without incurring as much potential risk as a stock market investment.

5) Company savings accounts/ salary accounts/ corporate accounts

There are many different names for these accounts. In essence, a salary account is an account opened by a corporation to simplify the process of giving out salaries to their employees. In some cases, these accounts may be subject to better interest rates, lower fees, etc. Companies tend to open such accounts in bulk for their employees.

6) Minor’s savings accounts  

While regular savings accounts require individuals to be over the age of 18 to open an account, minors are allowed to open a savings account with their parent/ legal guardian. Parents/ legal guardians generally open these accounts to educate their children about money or invest for their future. They must be handled exclusively by the parents/ legal guardian until the minor reaches 10 years ago. A minor account automatically turns into a regular savings account when the child reaches the age of 18.

7) Student’s savings accounts

Student savings accounts are offered by some banks and financial institutions as a way to educate students when it comes to finances. They also allow the student to save and invest for their future. These accounts function like regular savings accounts but may have low or zero balance requirements, given that students are just learning how to budget their finances. 

8) Women’s savings accounts

Women’s savings accounts were introduced to encourage women to join the banking system. While the minimum balance requirements are generally the same for women's accounts and regular savings accounts, they get other privileges like reduced fees, cashback offers, low ATM fees, and so on.

9) Senior citizen savings accounts

As the name suggests, these accounts are meant for senior citizens only. In some cases, these accounts have slightly higher interest rates, amongst other factors like reduced banking fees. These accounts may also be linked to a senior citizen’s pension fund. This makes accessing their funds easier and hassle-free.

10) NRI accounts

NRI (Non-resident Indian) accounts are savings accounts that cater to Indians who live abroad or people of Indian origin living overseas. There are two main types of NRI accounts offered in India. These are as follows -

11) Non-resident ordinary savings accounts (NRO)

NRO accounts are non-resident accounts opened in India. NRIs open these accounts to manage the money they earn in India. Money can be deposited in this account in Rupee or foreign currency. However, if the money is transferred in foreign currency, it is subject to the exchange rate at the time of deposit. The interest earned on an NRO account is subject to taxation in India.

12) Non-resident external savings accounts (NRE)

NRE accounts are non-resident accounts that can be opened from outside India. NRIs usually use these accounts to repatriate money to their families in India or store their foreign earnings to invest in the country. The deposits in these accounts are usually in foreign currency. As a result, they are subject to risks based on currency rate fluctuations. The interest earned on an NRE account is not taxable in India.

13) 3 in-1 accounts

Some banks offer a 3 in 1 account to make the process of investing easier. First-time investors must open a savings account, a trading account, and a Demat account to start trading. This can be a little tricky, especially if they open these accounts in different banks. To simplify this process, some banks offer a 3-in-1 account where users can use features of all three accounts. They may be in the form of a hybrid account or just three separate accounts that are interlinked.

14) Privilege Accounts

Privileged accounts may offer special rewards, higher interest rates, increased withdrawal limits, and so on. The catch is that users must maintain a relatively high minimum balance for these accounts to be eligible for these special features.

15) Health savings accounts

Health savings accounts are accounts made to save money for health and wellness purposes. These accounts may work as a savings account- cum - insurance policy. While insurance covers the bulk of the hospitalisation fees, the money saved in the savings account is used to pay for pre and post-hospitalisation treatments and medical care.

16) Digital savings accounts

Digital savings accounts are savings accounts with their services entirely online. They function similarly to regular bank accounts; they usually have higher interest rates as they do not have to spend money on maintaining physical locations. While some major banks offer digital savings accounts, these accounts are gaining popularity through new-age money apps like Fi Money.

In a nutshell

In conclusion, understanding the different types of savings accounts is crucial in finding the one that best suits your needs. Regular savings accounts provide a safe haven for funds, while joint accounts allow multiple individuals to access and manage funds. Zero-balance savings accounts are ideal for beginners, and high-yield savings accounts offer higher interest rates. Other specialized accounts include company savings accounts, minor savings accounts, student savings accounts, women's savings accounts, senior citizen savings accounts, NRI accounts, 3-in-1 accounts, privilege accounts, health savings accounts, and digital savings accounts. Exploring these options enables individuals to make informed decisions and effectively manage their finances.

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Frequently Asked Questions

1. What are the main types of savings accounts?

There are various savings account types: regular for standard use, high-interest for better returns, zero balance for no minimum requirement, and corporate for employee salary distribution.

2. What are the classifications of accounts?

Bank accounts in India can be classified into various categories. Savings accounts are commonly used by individuals for everyday banking and offer modest interest rates. Current accounts cater to businesses and have higher transaction limits but offer lower interest on deposits. Fixed deposit accounts are for long-term savings with higher interest rates while recurring deposit accounts allow regular monthly deposits.

3. How do I choose a savings account?

When choosing a savings account you should consider the interest rates, fees, and minimum balance. Look for an account with a high interest rate, minimal fees, and a balance that you can maintain. You could even opt in for a zero-balance account.

Disclaimer

Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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