Savings Account

Everybody who is an active earner wants to keep their money safe. For new jobholders or businessmen, this could be challenging.

To navigate your finances in the most effective way, your money should not be stored away at home. You must have a savings account in a reliable financial institution for not just the safekeeping of your money but also its contribution to the economy. 

What is a Savings Account

When someone asks what is a savings account, it can be simply explained as a deposit account that is held with the bank or credit union to manage an individual's savings, investments, and expenses of the particular person.

This money which is kept safe often helps earn compound interest. 

A savings account meaning implies a particular bank-offered service which helps the customers of a bank to store money while earning interest on their deposits.

Money can be withdrawn too, from these accounts at any point when the customer wants.

Some saving accounts offer higher interest rates than others. It varies with the banks.

What are savings accounts and how do they work?

In order to have a savings account, customers must first visit a bank of their choice and create a savings account. Any sum of money can be deposited there. This amount can be used for making purchases through both online and offline methods.

The deposited money in the savings account helps earn interest which gets deposited back into the same account. In this way, the new balance earns interest, and the deposited sum increases continuously. 

When money is deposited in a savings account, it is insured by the Reserve Bank of India (RBI).

If in any circumstances the institution that has the money suffers from anything, the money will be given back to the customer- however only to a certain limit. 

The RBI only insures up to Rs 1,00,000  per depositor which is insured by the bank, depending on the ownership category.

When is a savings account used?

You might face the question - what are savings accounts purposes?

A savings account can be used for multiple purposes, some of which are listed below.

To deposit or withdraw cash

One of the most traditional ways to make deposits or withdrawals is often done by using a savings account. 

To deposit or withdraw cash using a savings account, you typically have a few options.

To Deposit Cash -

1. In-Person at a Branch: Visit your bank's branch and fill out a deposit slip, including your savings account number and the amount of cash you wish to deposit.

Give the cash and the deposit slip to the bank teller, who will process the transaction and provide you with a receipt.

2. ATM Deposit: Some banks have ATMs that accept cash deposits. Insert your debit card into the ATM, enter your PIN, and select the deposit option.

Follow the on-screen instructions to deposit the cash, and the ATM will provide a receipt as confirmation.

To Withdraw Cash -

1. ATM Withdrawal: Use your debit card at an ATM to withdraw cash from your savings account. Insert your card, enter your PIN, and select the withdrawal option.

Follow the on-screen instructions to specify the amount you want to withdraw from your savings account, and the ATM will dispense the cash. Remember to take your card and the receipt before leaving.

2. In-Person at a Branch: Visit your bank's branch and fill out a withdrawal slip, including your savings account number, the amount of cash you want to withdraw, and any other required details.

Give the slip to the bank teller, who will process the transaction and provide you with the requested cash.

To Deposit cheques

Cheques can be deposited directly into a savings account if the bank permits the procedure. The bank might as well allow checking the deposits in the savings account which can be done via a mobile application if it exists. 

Transfer To and From Checking (internal)

If a customer has a checking account, the money can be easily moved from the checking account to the saving account within the same bank, instantly. 

Bank-to-bank Electronic Transfers

Electronic transfers from one bank to another can be made from a savings account. These include both withdrawals and deposits.

Direct Deposit

If the employer of the user pays by the method of direct deposit, money can be placed directly into the savings account without any hassle.

Requesting a Cheque

In case of situations where the account holder has to withdraw large amounts from the saving account, a cheque needs to be printed from the bank. 

In April 2020, the rule of a restricted number of withdrawals in the savings account was stopped.

Until the bank does not restrict the number of withdrawals, the customer is allowed to make any number of withdrawals.

In this case, however, the bank can set its own limits on its savings account. 

Savings accounts are mostly compared taking into consideration the annual percentage yield which is paid on the account and also keeping in other details like minimum deposit, amount, and fees. 

Why open a savings account? 

Banks and credit unions often prefer customers to have a saving account for the following critical reasons. 

Offers safety

When someone asks about a savings account meaning and its requirement, then you should explain to them that it is the safest place to store money, as it is insured by the government when stored in the bank. 

Helps achieve personal financial goals

When stored in a saving account, the money is kept aside which will help the customer to achieve their financial goals. The money saved in the account is very accessible and also helps avoid impulse buying.

Interest in saving accounts

Most saving accounts help accumulate a small amount of interest which adds to the savings of the customer. 

How to get a savings account?

Opening a saving account does not take much time.

The smartest and easiest way to do so is to find a trustable bank of your choice and open an account via an online application.

The same can also be done while in person by visiting the local branch of the same bank.

Submit the application, provide the required documentation, and the account will be opened for you in no time.

To open a savings account, there are some requirements that need to be specified. 

Comparing the interest rate, fees and minimum balance requirements should be considered before opening a bank account. This helps the customer know the best of the choices available. 

In most cases, the customer can be able to access his account using a debit card or with an account and a routing number.

How much does a savings account cost?

Saving accounts are usually free however there are usually limitations.

Most banks charge a monthly or annual fee if the customer does not maintain the minimum balance of the account, and these minimum balances are deducted from your savings account.

If the balance drops to zero, then the customer may owe the bank an overdraft fee. The solution to this is to open a zero balance account where one need not maintain a minimum balance.

Conclusion

Opening a savings account for a customer is a good idea when he or she has financial goals to aim at.

When you know what is a savings account and its significance, with its presence, you will find it easy to store the cash that is required at the moment or in future circumstances. 

A bank or credit union are the best places to open a savings account and provide individuals with a safe place to store their money.

Savings Account Related FAQs

A savings account works by depositing money into the account, which is held by a bank or financial institution. The deposited funds can be accessed and withdrawn as needed, and the account holder typically earns interest on the balance.

The top 3 benefits of having a savings account are - 

  • Having a safe and secure place to keep your money and funds 
  • Easy access to your funds when required 
  • Earning interest on your stored funds, thus allowing it to grow over time. 

Yes, savings accounts are typically considered safe. Almost every savings account in banks is insured by government-backed deposit insurance programs, which protect the holders’ funds up to a certain limit, even in the case of economic collapse or other problems. 

Yes, you can seamlessly access the money in your savings account according to your need. Most savings accounts offer the options of online and in-person withdrawals, the usage of cheques, electronic transfers, and even ATM access. 

You can open a savings account at various financial institutions such as banks, credit unions, and online banking platforms. These institutions offer savings accounts with different features, benefits, and interest rates.

The following savings accounts are considered the best for children in India - 

  • ICICI Smart Stars Savings Account 
  • Future Stars Savings Account by Axis Bank 
  • HDFC Bank Kids Advantage Account 
  • My Junior Account by Kotak Mahindra Bank
  • Pehla Kadam by SBI Bank. 

Yes, savings accounts can receive money from abroad. Many banks and financial institutions facilitate international money transfers, allowing funds to be deposited directly into a savings account from overseas. There are typically two common methods for receiving money from abroad into a savings account - wire transfers, and online payment services.

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