Savings account 101: Meaning, features, benefits and more

Saving money is a habit that can help you achieve financial independence. It allows you to meet both present and future needs while preparing for unexpected financial emergencies, such as medical expenses or home and car repairs. However, how you save your money is important. Storing cash at home not only puts it at risk of theft but also causes its value to shrink over time due to inflation. This is why opening a savings account is a good idea. A savings account offers a simple, secure, and easily accessible way to save and grow your money. Let’s explore the benefits of a savings account and how it works.  

What is a savings account? 

A savings account is a financial tool offered by banks that helps you securely store your money while earning interest on the deposited amount. This interest is credited monthly, quarterly, or annually and allows your savings to grow over time.

With a savings account, you can withdraw your money whenever needed. Your funds remain safe in the bank and are protected from theft and other risks. You can access your savings conveniently using an Automated Teller Machine (ATM) and a debit card or by withdrawing cash through a cheque at the bank. 

Additionally, with online banking, you can also manage your account through your smartphone or computer. You can transfer funds and make payments seamlessly without ever having to leave your home or office.

Key features of a savings account  

Here are some features of a savings account:

• Liquidity: Savings accounts are highly liquid and allow you to withdraw your funds within minutes. You do not have to wait around. You can simply use an ATM or go to the bank to withdraw your funds. While banks operate within business hours, ATMs can be accessed 24 x 7. 
• Automated facilities: Savings accounts offer the option of automation, where you can set up auto-debits for your account. You can use this feature to pay for your utility bills or to automate transfers for investments. 
• Multiple types: There are many types of savings accounts, like online savings accounts, zero savings accounts, women’s savings accounts, kids’ savings accounts, senior citizens’ savings accounts, salary accounts, joint savings accounts, and more. You can open an account as you need. 
• Security: Savings accounts offer a high level of financial security. In India, each depositor is insured for up to Rs 5 lakh on both the principal and the interest amounts. This protection is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India.

Methods of opening a savings account 

You can open a savings account either offline or online based on your convenience. Here are the steps for both these methods:

Opening a savings account offline: 

Step 1: Visit the bank: Visit your preferred bank branch with the required Know Your Customer (KYC) documents, such as proof of identity, proof of address, and proof of birth.

Step 2: Fill out the application form: Complete the application form provided by the bank and ensure all the details you provide are accurate.

Step 3: Submit your documents: Submit copies of your KYC documents with the form to the bank.

Step 4: Verification and deposit: The bank will process and verify your application. Once approved, you can deposit a small amount to activate your savings account.

Opening a savings account online:

Step 1: Visit the bank’s website or app: Go to the official website or download the mobile application of your chosen bank on your smartphone. 

Step 2: Apply by filling out the form: Fill in the required details and upload copies of your KYC documents, such as proof of identity, proof of address, and proof of birth. 

Step 3: Verification and activation: After successful verification of your documents, your online savings account will be opened, and you can start using it immediately by depositing a small amount.

Savings account benefits 

Here are the top seven benefits of using a savings account:

1. Security: Storing your money in a savings account is far safer than storing it at home. Additionally, amounts up to ₹ 5 lakh are insured by the DICGC for every bank holder. So, even if something happens to the bank, your money is protected up to ₹ 5 lakh. 
2. Withdrawals and deposits: Savings accounts allow you to make withdrawals and deposits based on your needs. There might be some restrictions in terms of free withdrawals, remember to keep those in mind to avoid paying unnecessary charges. 
3. Online and offline features: With both online and offline functionalities, savings accounts cater to people from all walks of life, regardless of age, education, or financial background. Depending on what works best for you, you can access your money easily through ATMs, cheques, online banking, or mobile apps. 
4. Growth through interest: Unlike storing cash at home, your money in a savings account grows through the interest earned. This helps tackle inflation and grows your savings over time, making you more financially independent. 
5. Promotes financial discipline: A savings account encourages regular saving and helps you stay financially disciplined. Over time, this habit enables you to achieve major financial goals, such as funding a child’s education, marriage, or even your retirement. 
6. Wide accessibility: Savings accounts are widely accessible across urban and rural areas. Many banks also offer global accounts and enable you to access your funds from anywhere in the world. This makes savings accounts a reliable and convenient option, no matter where you are. 
7. Financial security: Savings accounts allow individuals without a regular income, such as homemakers or senior citizens, to secure their financial future. Saving regularly and earning interest on the deposits empowers people and helps reduce dependency on others. 

How do you maximise earnings from a savings account? 

Here are three ways to maximise your earnings from a savings account:

1. Choose an account with a high interest rate: Interest rates can differ from bank to bank. So, you must research well and choose a bank that offers a high interest rate that can help you earn more over the years. 
2. Save every month: Making a habit of putting aside a portion of your income into a savings account helps your balance grow. The higher the account balance is, the more interest you can earn. 
3. Do not withdraw your funds unless necessary: Banks offer immediate and unlimited access to your funds in a savings account. However, it is important to exercise restraint and avoid withdrawing money unless it is necessary. Being mindful of your spending is essential.  

Savings accounts cater to a wide range of individuals, including salaried employees, business owners, women, children, senior citizens, couples, and even Non-Resident Indians (NRIs). With banks extending their reach to the remotest corners of the country and the digital revolution transforming banking in India, opening a savings account has never been easier.