What is a Savings Account

What Is A Savings Account And How Does It Work?

What is a savings account?

When you earn an income from your job or business, you don't spend it all at once. You want to keep some of it for emergencies or your own future development. You can't afford to carry all your cash in your wallet. It's impossible, and even if it is, you risk losing it.

Also, you can't afford to hide it in your home; there will always be a risk of a theft. And this is where a savings account can help. Many people have heard about savings accounts. However, they do not know what it is and what it's all about. This article will tell you everything you need to know about savings accounts.

Before everything else, you need to understand the definition and meaning of a savings account.

Savings account definition: A savings account is a type of account that allows individuals to deposit and save their money while earning interest on the balance. Generally, this type of account has limited transactions and a minimum balance requirement.

Saving account meaning: The primary purpose of a savings account is to help individuals deposit and keep their money safe. It is perfect for depositing your salary. Having a savings account can also help you set targets and start saving for it accordingly. It also means you can handle certain unforeseen and unexpected financial situations that may come your way.

Types of savings accounts

  • Regular Savings Accounts
  • Kids Savings Accounts
  • Women's Savings Accounts
  • Senior Citizen's Savings Accounts
  • Zero Balance Savings Account

All these accounts are different, and their features may vary. For instance, most savings accounts have a minimum balance requirement. However, a zero balance savings account, as the name suggests, does not require a minimum balance.

This type of savings account is helpful when you do not have a stable job and income. You will be happy to know that opening a zero balance account is simple and easy. It takes less than five minutes.

How does a savings account work?

Savings accounts are easy to open and operate. As soon as you open a savings account, you can deposit your money and start earning interest on your balance.

Savings accounts are flexible. They allow several methods to deposit money and add to your savings. These include:

  • Cheque deposits through the ATM
  • Cash deposits through the ATM
  • Cheque deposits in your branch
  • Cash deposits at your branch
  • Online deposits - NEFT, RTGS and IMPS

While all savings account will earn you interest, the interest rate varies from bank to bank. Generally, the more deposits you have in your account, the more income you will get. Also, when opening a savings account, you may want to consider interest rate as one of the factors. It goes without saying that a higher interest rate will earn you more.

Why do you need a savings account?

Now that you know what a savings account is let's discuss why you need one. A savings account allows you to save, helps keep your money safe, earns you interest, and the best part is that you can access your money whenever you want.

And that's not all!

A savings bank account allows you to make and receive payments, make investments, pay your credit bills, etc. You can use your account to recharge your phone and pay for water, electricity, and other utility bills.

Who can open a savings account?

Anyone can open a savings account online. If you are an Indian citizen, you can open a savings account individually or jointly with another person, preferably a family member or a friend. All you have to do is to submit your application with the KYC documents of both applicants.

Benefits of opening a savings account

Opening a savings account comes with many benefits. Let's look at some of them:

  • Interest earnings: A savings account allows you to earn interest on your balance. It's a perfect way to generate more wealth.
  • Financial goal accomplishment: A savings account can help you save and achieve your financial goals, such as buying your dream car, or building a house, etc.
  • Liquidity and accessibility: A savings account allows fast and easy access to money. You can deposit or withdraw your money whenever you want.
  • Budgeting and money management: A savings account allows you to manage and budget your money with ease.
  • Financial security: With a savings account, you get financial security. It allows you to save your money instead of spending it unnecessarily. This lets you handle unforeseen expenses and avoid unnecessary stress.
  • Relationship building with banks: Opening a savings account is a perfect way to start and build a relationship with your bank. As a result, you check out other banking products and services that you may need in future.