Though a savings account attracts lower rates of interest on deposits, it helps you build up an emergency fund for rainy days, pay your bills in time, or withdraw cash whenever needed. Yes, the pros and cons of opening a savings bank account are many; take a look.
Do you have a goal of building up a fund that you can access whenever you need? Are you saving up to take a trip abroad, take care of a house deposit, pay for your child’s higher education, or create a financial nest to cater to your retirement years? If yes, then you should get a savings account of your own. Well, this does not mean that you sign up for the first credit union or bank that comes your way. A careful analysis of the various advantages and disadvantages of this personal finance aid will give you more value for your savings and help you take financially sound decisions.
Still not sure of why you should open a savings bank account? What follows here will help.
Advantages of Regular Savings Accounts
Gain quick and easy access to savings: Be it mutual funds, SIP, NSC bonds, PPF account, insurance premiums, stocks, jewelry, gold bonds or property, there are very few investments that can match the liquidity measures offered by a savings account. So, in case you have to deal with an unexpected payment, loan payment, or a medical emergency, all you need to do is use your debit card or cheque book to withdraw from the amount deposited by you. Yes, with a savings account to fall back upon, you can handle all kinds of financial emergencies to get your life back on track.
Safekeeping of your money: You have managed to make extra profits, or your expenditures have not messed up your incomes this month; what do you do? While placing the extra cash in a piggy bank is an attractive idea, it is neither safe nor fetches you any returns in the form of interest. Stashing away cash under your mattress or at the far end of a drawer is risky too as a burglary or fire may draw you away from your savings. By depositing your hard earned money in a savings account, you get a guarantee of the same being appropriately insured and safe!
No minimal deposit or large start-up investments: You have only Rs 1000 to open your savings account online? No problem! This is one of the primary advantages of opening a savings account – you need minimal initial investments. So, if you have just started earning but want to develop the habit of spending, or you want assured returns but have little to spare for mutual funds or bonds, then a savings account online is surely the right way to go.
Automate your bill payments: Do you have to pay bills that stress you out with stringent payment clauses and due dates? Your savings account gives you the opportunity of setting up direct debit or auto pay instructions for paying your bills automatically. Apart from saving upon late fees, you gain the assurance that your bills are being paid through the money that’s yours, rather than the borrowings attributed to credit cards or other sources.
Disadvantages of having a Savings Accounts
Low interest rates: If you are saving with an aim of seeing your money grow quickly, then you are in the wrong place with a savings account. The liquidity and security of your savings account deposits comes with a trade-off – that of comparatively low interest rates. However, if you are okay with limited yields or low returns, or are unsure about your investments in mutual funds, government bonds, stocks, and other high-yield vehicles of investment, then go right ahead.
Money is not locked in: Your savings bank account can lure you to dip into your deposits whenever you wish. This may serve to be detrimental if you end up spending your good money on non-essentials such as premium cars, electronics, vacations, or designer clothes; rather than necessities or emergencies. If you are likely to get tempted into spending needlessly, then it makes good sense to push your savings into certificates of deposit, stocks, or other maturity-driven long-term investments
Minimum account balance maintenance charges: Even though banks and financial institutions that offer savings account facilities in India do not ask for large initial deposits, they do have a requirement for a minimum balance. In case your savings fall below the minimum amount, you will be charged with a pre-defined fee. This is especially true in case your deposit dips due to an emergency or you keep drawing from your deposits frequently.
We are sure that a careful assessment of these benefits and drawbacks of saving accounts will help you understand the importance of opening one for yourself. Apply for a regular or premium savings bank account today!