When you think of banks, the first and foremost service synonymous with banks is a savings account. A savings account today is officially the safest place to save money. Having a good savings account balance also plays a vital role in helping you make money. Here’s how.
A savings account is a version of a bank account that allows you to store your money securely. Savings accounts are a convenient way to store your money in a bank, given that they protect your money against inflation and offer a higher degree of liquidity and interest rates than most investments. Using Fi, working professionals in India can create a zero balance savings account in minutes — it’s entirely online & a completely paperless process.
Now that we’ve established the need and importance of savings accounts when storing our money, let's discuss some advantages of having a savings account.
A significant advantage of a savings account is earning passive income through interest. It's a great way to earn money without actively working for it.
A savings account used to be a good hedge against inflation, but now there are more effective ways to beat inflation, such as investing in stocks and mutual funds and having a side hustle. These methods help preserve the purchasing power of your money over time.
Savings accounts offer high liquidity compared to most investments. Unlike fixed deposits or some mutual funds, there is no lock-in period or exit load. With a savings account, your funds are readily available and in your control.
Savings accounts have a lower risk compared to market investments. They are less affected by financial market changes, and nationalized banks are backed by the government, reducing the risk of default. Note: While the risk associated with savings accounts is relatively low, they aren't considered risk-free. Cases of default are extremely low, but it is still a possibility.
While savings accounts have many advantages over traditional savings methods and are safer than most investments, they aren’t fully perfect.
Some savings accounts usually have minimum balance requirements, and not meeting them results in penalties. Minimum balance requirements vary among banks and account types. Not all accounts require you to maintain a minimum balance, however. Fi offers a zero-balance savings account that takes only a few minutes to sign up for and has no minimum balance requirements.
Unlike financial instruments like fixed or recurring deposits, the interest rates the bank offers for savings accounts can be revised over time and can prove to be more challenging.
Savings accounts offer slower growth than other investments, like mutual funds or stocks, which carry higher risks but more significant growth potential.
Banks typically charge a fee for managing your savings account. It is a good habit to be aware of all the charges you could incur for services involving your bank account. To name a few, maintenance charges, ATM fees, wire transfer fees, debit/credit card transaction fees, foreign transaction fees, card issuance charges and so on are some of the fees charged by the bank.
Now that we understand what to expect from a savings account let’s understand the nuances between the different types of savings accounts.
These are regular savings accounts. They act as a safe house for your funds in the banking system. They help hedge your money against inflation while making a small profit over time based on the interest rates they offer.
Zero-balance savings accounts are ideal for new banking users as they don't require a minimum balance or incur penalties for having no funds.
High-yield savings accounts, offered by online-first banks and digital-only financial institutions, provide higher interest rates and potential rewards due to their lower operational costs.
Companies open these savings accounts for their staff to make the distribution of salaries easier. These accounts automatically turn to regular savings accounts if salaries aren't credited for 3 months.
Minor's savings accounts are designed for long-term investments for children. A parent or guardian manages the account until the child turns 10. At that point, the child can operate the account. Upon reaching 18, the account converts into a regular savings account.
These accounts are meant for senior citizens only. They function similarly to regular savings accounts but have special privileges and slightly higher interest rates.
A joint savings account has the features of a regular savings account but with two or more people that have access to the said account to withdraw or deposit funds.
These accounts are generally preferred by individuals looking to invest in the financial markets. They combine a savings account, a trading account, and a Demat account to make the investment process simpler.
While the criteria for opening a savings account differ from bank to bank, here are some common ones:
1. The individuals that wish to open a savings account must be over the age of 18.
2. They must be residents of India.
3. They must have all the necessary documentation to open a savings account.
In some instances, foreign nationals may also open a savings account in India. Minors may also be able to open a savings account with their parent(s)/ legal guardian.
Here are some examples of the standard identity and address proof documents:
1. Identity proof
2. Address proof
In addition to identity and address proof, banks may ask for physical or digital copies of your passport photographs.
At Fi, we have a simple, swift, and hassle-free process for opening a digital savings bank account. Here are the steps for an online savings account opening with Fi.
1. Download our mobile app - You must visit our official website or download our mobile app and get started with your online savings account.
2. Make sure you’re in a bright area - This is necessary because you must click a selfie and submit your picture to continue the account opening process.
3. Keep your KYC documents ready - Opening a Fi Account is an entirely paperless process. However, we need your KYC documents, such as your Aadhar card and PAN card.
4. Fill out the form, and get your savings account - The entire process will be complete before you know it. We place a high value on your time at Fi. Ideally, it would not take you more than five minutes to fill out and submit the application form online. Once we have verified all the necessary documents, your virtual savings account with Fi shall be activated and ready for you to operate.
A savings account is a popular and versatile financial tool that offers safety, interest earnings, and useful banking features. It is essential for investing and helps your money grow. Using Fi, working professionals in India can create a zero balance savings account in minutes — it’s entirely online & a completely paperless process.
There are several different kinds of saving accounts in the world. Four of the most common savings accounts are - Regular savings accounts, zero balance savings accounts, high-yield savings accounts and salary accounts.
Different people might have different reasons to have a savings account. The most common reason is to save money from losing its purchasing power over time and to have a safe space to store it.
Yes, you can generally write checks from a savings account in India.
While it isn't impossible to lose money in a savings account, it is highly unlikely. You need to keep in mind that as long as the rate of interest offered by the bank is higher than the rate of inflation, you will not lose money in your savings account.
A traditional savings account is the most common form of a savings account. It is a financial instrument offered by banks and other financial institutions for individuals to save and grow their money.
Savings accounts are generally considered low risk as they do not pose the threat of loss of capital.