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ABC of your savings bank account

ABC of Savings Bank Account—and How to Break Its Prejudices

by Holistic Leave a Comment | Filed Under: Uncategorized

You have a savings bank account, yes.

You have been using it for years, likely for decades.

It has been so integrated with your life that you barely notice its importance to financial success.

But have you ever thought about the significance of having the right savings bank account? The impact it can have on your personal finance?

Many of us don’t realise that we can save money effectively by banking the right way.

So what is this right way to bank?

Is there a rule book?

No. But the things we’re about to discuss below can make you bank the right way.

Understanding various types of savings bank account and the services available will not only help you save money butgenerate more of it.

Discover the unknown features and benefits of savings bank accounts and everything around it in this article.

Table of Contents:

1. Savings Bank Account
2. Types of Bank Account
3. Instant Liquidity
4. Saving’s Bank Account Holding
5. Savings Bank’s Safety of Principal
6. Interest Rate of Savings Bank Account
7. Inflation Vs. Savings Bank Account
8. Tax Liability of Savings Account Interest
9. Conclusion

To begin with, you need to see the different bank account options available to you. Depending upon your requirement, you need to choose the right bank account.

For example, an entrepreneur will choose a current account; and a salaried person will choose a savings bank account.

A savings bank account is most likely what you need.

What is a savings bank account? Who can open a savings bank account? Find it out below.

Savings Bank Account:

As the name suggests, the purpose of saving bank account is to encourage you to save more money.

With a savings bank account, you can make deposits to save portions of your income, earn interest on your savings and withdraw the money when you need it.

At least that was the intent years ago. There are inspiring stories where people saved money in lakhswith small deposits in their savings bank account.

Read: Oseola McCarty Proves You’ll Still Get Rich

Today, a savings bank account has become more of a tool than a savings instrument. Some are using their savings bank account only as a “wallet”.

Regardless, this change over time hasn’t taken away the powers of a savings bank account. It still has its fundamental advantages in addition to being a cornerstone to financial success.

The advantages of a savings account are: instant liquidity, safety of principal, and an interest on the account balance maintained.

But who can open a savings bank account in India?

Any resident Indian 18 years of age or above can open a savings bank account in India.

Although there is no age limit for opening a savings bank account, even a minor can open a savings bank account with their natural guardian. Minors who are above the age of 10 years can operate the savings bank account themselves.

You can make deposits with cash or check and withdrawals using the withdrawal slip directly at your respective bank branch. You can also make withdrawals at any of the bank’s Automated Teller Machines (ATM).

It is savings bank account in its simplest form, for a regular or a traditional savings bank account.

Let’s look at the types of savings bank accounts; you may find one that suits you the best.

Types of Savings Bank Account:

TO cater to the needs of their customers, banks have begun offering different types of savings bank accounts with varying specialised benefits.

And today, you can choose from creating a zero balance digital accounts to create a professional savings account with premium services.

i) Zero Balance Savings Account

Zero balance savings bank accounts are typically digital savings bank accounts offered by the banks today.

These savings accounts do not require any initial deposits to create them. And you can create a zero balance savings bank account online using a computer or the bank’s mobile app.

How to create a zero balance account?

    • 1. Visit the bank’s website of your choice.
    • 2. Go to the zero balance savings account page.
    • 3. Enter your details in the signup form.
    • 4. It includes your name, email ID, and mobile number.
    • 5. Provide your Aadhar number for eKYC verification.
    6. Start using your digital zero balance savings account.

Note that some banks may require verification over a video call for added security. The overall account creation process only takes a few minutes.

Benefits of Zero Balance Savings Bank Account:

  • Zero Monthly-Average Balance
  • Free virtual debit card
  • Free/minimal charge physical debit card
  • Zero/minimal charges on value-added services
  • Free unlimited ATM withdrawals
  • Free unlimited internet transactions

One of the advantages of having a zero balance savings account is the cut on different charges you would pay with a traditional savings bank account.

A zero balance savings bank account is ideal for students, people early in their careers, and retirees.
n though the account ope
However, anyone can make use of this type of account to use as a spend-only account.

ii) Professional Savings Account

There have been too many queries, asking,

What is a professional savings account?

Let’s get one thing clear.

A “professional” savings account is only a colloquial term banks use to present their savings bank account with prime features and benefits. It also includes the professional savings bank accounts with a sweep-in facility.

In simple terms, a professional savings account is a savings bank account with special privileges to the account holder. And these special privileges vary with different banks that offer them.

How to create a professional savings account?

You can create a professional savings bank account in India at any bank branch offering the same.

Even though the account opening process is the same as any traditional savings bank account, it has some specified prerequisites.

These specified prerequisites may vary from bank to bank.

For example: A professional savings bank account would require a higher minimum balance than a regular savings bank account.

Features of a Professional Savings Bank Account:

The features and benefits of a professional savings account is one of the reasons people go for it. The most common are,

  • Special Privileges at the Bank; no waiting in the queue.
  • Doorstep Banking Services
  • Dedicated Relationship Manager
  • Free Cheque Books
  • Free Demand Drafts
  • Free Safety Locker
  • Free Debit Card,
  • Higher transaction limits, etc.

The features and benefits mentioned may vary with every bank.

iii) SweepSavings Account

A sweep savings bank account is a special kind of savings account. It is also often referred to as a professional savings bank account.

What is a sweep savings bank account?

A sweep savings account is a savings bank account with a deposit threshold. While depositing amounts greater than this threshold, it automatically transfers the additional money to high-interest-yielding instruments at the end of each business day.

How does a Sweep Savings Account Work?

For example: If you have a sweep savings account with a threshold of ₹50,000 and deposit ₹80,000 in the same account, the odd ₹30,000 invested in a high interest yielding instrument, like an FD.

This action is called sweep-in. Meanwhile, the reverse of this is called sweep-out.

In a sweep out, when you withdraw money, the account balance may fall below the prescribed threshold. If this happens, the money from high-interest instruments is put back into your sweep savings bank account to ensure liquidity.

By operating in this way, a sweep account offers the account holders higher interest on deposits and liquidity at the same time.

A sweep savings bank account is also called a “Flexi deposit.”

Instant Liquidity:

The main attraction in a savings bank account is its high liquidity.

The only thing that offers better liquidity than a saving bank is cash.

You can withdraw cash from your savings bank account at the bank branch during working hours. Besides, you can also make use of the ATM.

ATM stands for Automatic Teller Machine.

When you need money you can withdraw from any ATM. It can be even during the non-working hours, evenon a non-working day.

ATM withdrawals will have a maximum limit for a day. Depends on the type of account you have, you can withdraw in a single day to the maximum of ₹20000, ₹25000, or ₹50000.

These days, banks are providing doorstep service to their priority account holders with professional savings bank account.

When you need money or want to deposit money, thebanks can arrange a staff to come to your place and give money or collect money. To be a priority account holder or a preferred client, the minimum balance to be maintained will be higher. It is usually ₹1 lakh or above.

Savings Bank Account Holding:

When it comes to account holding, there is two way of looking at it.

One is account centric.

1. How many can hold a single savings bank account?

You can hold this savings bank account as a single account holder.

You can also opt to hold your savings bank account jointly with your spouse or any other person. Also, you can nominate your next kith and kin in your savings bank account.

Secondly, there is an alternate way of looking at it—that is individual-centric.

2. How many savings bank account can I hold?

Do not juggle with too many savings accounts!

As stated earlier, a savings bank account is pivotal in achieving financial success. But what typically happens is that many people have 4-5 or even more savings bank accounts. It makes a mess in their finances, even if you do not use them much.

Ideally, 2savings bank accounts is enough to keep your personal finance neat and in good shape.

Use one of these savings accounts for all your expenses and the other exclusively for savings purposes, including investment transactions. Although, you may have one more savings bank account as required. For example: a joint savings bank account with your spouse or child.

But at all times, try not to have too many savings accounts.Create a new savings bank account only if it is essential and has a specified purpose.

Savings Bank’s Safety of Principal:

The old school thinking is that, “Keep your money in your savings bank account. It is safe.”

But how much of that is true?

Is there an unexplored caveat to it?

The balance you keep in our savings account is not 100% safe. The balance in your savings account is insured only for a maximum of ₹5lakhs. This amount is the insurance cover by Deposit Insurance and Credit Guarantee Corporation (DICGC).

All the commercial banks operating in India will have DICGC insurance cover. It includes even the branches of foreign banks operating in India. But when it comes to co-operative banks, you need to make sure whether they have DICGC cover.

It is reason enough to use your savings bank account only as a tool rather than an investment instrument.

If a bank is not paying the premium of their DICGC insurance scheme for 3consecutive years, this insurance cease to exist.

If you are depositing with a co-operative bank, make sure they still have the DICGC insurance cover.

But the safety of principal isn’t limited to this kind of risk only.

Many people deposit a large sum of money in their savings bank account because of the “safety of principal” and liquidity. But what they don’t consider is the effect of inflation and the taxation on interest earned.

Before we analyse each of these, let us understand the interest rate of a savings bank account.

Interest Rate of Savings Bank Account:

The general prevailing rate for savings account ranges from 3-4.5%.

It continues to vary since 25-10-2011, when the RBI deregulated the savings account interest rates. Today, the range of interest rates for savings accounts with different banks is 3% to 5%.

However, the higher interest rates are offered only by the digital savings bank account. It is because they incur relatively low operating cost.

Aside from these, small finance banks offer even higher interest rates. Account-holders in small finance banks can get interest on their deposits in the range of 4%-7%.

But it is not advisable to choose a small finance bank since they are relatively riskier than a mainstream commercial bank. Also, the features and benefits of a savings account with a small finance bank is limited.

If you are very keen on earning a higher interest rate, along with liquidity, you can park your money in a liquid mutual fund.

Unlike a small finance bank, liquid mutual funds invest in high-quality commercial papers. The risk involved, even though very low, can be assessed, and there is complete transparency. Thanks to SEBI regulations.

To sum up, it seems beneficial to earn a little more interest from the savings bank account you use. But it is not worth it to make it your only reason to keep a large sum in your savings bank account.

There are better investment instruments; make use of them.

Inflation Vs Savings Bank Account:

“There are better investment instruments; make use of them.”

You cannot be new to the concept of inflation. It is the sustained increase in the price of goods and services over a year. As an effect, the money you hold as cash, or any money that doesn’t appreciate over time will lose its value gradually.

Here’s an excerpt from one of our articles to understand this better.
Inflation vs Savings Account You can read the complete article here: “Get Rich or Get Busy Struggling.”

Inflation is unstoppable. It will continue to have an impact on the economy forever.

As the interest rates are in the range of 3%-4.5%, it is impossible to beat inflation. You cannot even keep up with the inflation, let alone beating it.

If you are considering your savings bank account as an investment instrument, you are going to lose.

Keeping your hard-earned money in a savings bank accountis nothing less than neglecton your part.

Do not make that mistake. Use your savings bank account only as a tool if you want to achieve financial success.

Tax Liability of Savings Account Interest:

The interest you earn from your savings account is taxable!

Although, not all of the interest earned is taxed.

The IT Act 1961 allows a meagre exemption under section 80TTA for resident citizens.

The interest earned is exempt from income tax to the tune of only ₹10,000 per annum. The interest earned over and above this prescribed limit will be taxed.

You will have to pay the income tax for the interest earned under the head “Income from other sources.”

On the other hand, resident senior citizens enjoy an exemption of up to ₹50,000 on the interest earned. It is as per the section 80TTB of the IT Act, 1961.

Even though the law allows a small exemption on the interest income, it is next to nothing to anyone who wants to achieve financial success.

Considering all the facts discussed above, it is evident that a savings bank account interest isn’t in your best interests.

Conclusion:

A smith’s hammer may forge a thousand swords, but it cannot go to war.

Though a savings account plays a vital role in your financial success, misunderstanding its role could stop you from achieving it.

With the help of your savings bank account, explore and invest your savings in wealth-generating investment instruments. It can be anything from PPF to debt funds to equity mutual funds.

But, if you want to make your personal finance journey safer and smoother, you need to create a sound financial plan.

If you have any comments or questions, write them in the comment box below.

Or are you interested in creating a Comprehensive Financial Plan for your financial goals?

Skip the queue by registering for your 30 Minute FREE Financial Plan Consultation. Click the ‘‘BOOK YOUR SLOT NOW!’’ button below.

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Jey S
Jey S
24. September, 2021.
I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
I was about to retire and really not understanding how to invest money to have financial freedom and fulfilling my goals. Was desperately searching on internet way out and fortunately came across Holistic Investment Planners. I read number of articles on their website and realized that this is the agency which I want and engaged their services for my retirement planning. It is an excellent experience to be associated with Holistic. Right from day one our interaction was fantastic and they gave me such a wonderful plan that I had never imagined. I am fortunate enough to be in the client list of Holistic. I have recommended Holistic to my friends as well.
Lionel Faber
Lionel Faber
16. September, 2021.
I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
Sridhar
Sridhar
8. September, 2021.
Financial planning brings peace in life. Holistic Investment have supported in arriving financial plan based on future goals. My investments are regular since then. They are professionals in their business, will recommend others.
Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
Swetha Vasanth
6. September, 2021.
This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
Srinvas Kannan
Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
3. July, 2021.
I got a free first time consultation. I got my doubts resolved. They also gave additional advises for investment planning which was also useful.
Nellai B
Nellai B
26. June, 2021.
I have been associated with them for the past three years. They are very professional and polite in answering all our questions. I have complete trust in their suggestions. I strongly recommend for anyone. I am looking forward to have strong and successful association with them.
Google rating score: 4.4 of 5,
based on 61 reviews

Google Reviews

Jey S
Jey S
24. September, 2021.
I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
I was about to retire and really not understanding how to invest money to have financial freedom and fulfilling my goals. Was desperately searching on internet way out and fortunately came across Holistic Investment Planners. I read number of articles on their website and realized that this is the agency which I want and engaged their services for my retirement planning. It is an excellent experience to be associated with Holistic. Right from day one our interaction was fantastic and they gave me such a wonderful plan that I had never imagined. I am fortunate enough to be in the client list of Holistic. I have recommended Holistic to my friends as well.
Lionel Faber
Lionel Faber
16. September, 2021.
I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
Sridhar
Sridhar
8. September, 2021.
Financial planning brings peace in life. Holistic Investment have supported in arriving financial plan based on future goals. My investments are regular since then. They are professionals in their business, will recommend others.
Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
Swetha Vasanth
6. September, 2021.
This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
Srinvas Kannan
Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
3. July, 2021.
I got a free first time consultation. I got my doubts resolved. They also gave additional advises for investment planning which was also useful.
Nellai B
Nellai B
26. June, 2021.
I have been associated with them for the past three years. They are very professional and polite in answering all our questions. I have complete trust in their suggestions. I strongly recommend for anyone. I am looking forward to have strong and successful association with them.
Google rating score: 4.4 of 5,
based on 61 reviews

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