A savings account is a type of deposit account created and held at a retail bank. This account allows you to pay the interest, but unlike the Transactional Account or the Current Account, as we call it, it cannot have direct usage of paying the money e.g. through the medium of a cheque. These accounts help customers in setting aside a certain portion of their liquid property or assets as we call them while earning a considerable monetary return.
How Does Saving Account Work?
The Savings Account basically works the following way: All you need to do is open a savings account at the concerned bank. The bank in turn pays you the required interest on the money that you deposit in that account. The concerned bank then loans the money you have deposited to other people, with the sole condition of charging a slightly higher interest rate on the executed loan than that of what they return or pay you for your respective accounts.
How Much Cash Or Liquid Assets Should One Have In Their Savings Accounts?
Going by the standards of the general rule, financial experts and advisors, as we call them, recommend that one must have enough savings stacked in the savings account, which should be able to cover at least three to six months’ worth of bills. This solidification and safety precaution in turn provide you with a strong financial back up in adverse cases or cases of need like deaths, marriage arrangements, unprecedented accidents, medical treatments, loss of a job, etc. It’s only because of the liquidity and fluidity of your savings account that you can gain access to the money much more quickly and more easily as and when you are in need of it. Though some experts, analysts, and advisors advise you to store much more in your savings account, it’s almost a common perception, or should I say most people think that excess money should be stored in much higher interest-bearing accounts.
Online Savings Account:
Online Savings Account (OSA) is a savings account which is operated, carried out, and funded all on the internet. Online Savings Accounts possess the characteristics of a higher interest rate properly backed by much lower fees, in comparison to the traditional savings account. Most of these high-producing and high-yielding accounts have no minimum balance. In most cases, account holders link their online savings accounts to their currently existing external bank accounts to help ease and safe transfers of funds in-between multiple accounts. Some are also offered easier resources such as ATM cards so that the desired customers can directly access the funds in their other online accounts.
The Best Savings Account:
2018 has marked the advent of many good and reliable, in other words, the best savings account providing good return rates to the common public. Some of these are:
- ASAP Instant Savings Account:
Zero balance savings account with the introduction of auto sweep in feature, which means balance savings over 10, 000/- will automatically turn into a Fixed Deposit (FD)
- Kotak Mahindra Bank 811:
This is also a zero balance savings account with 6% of interest annually on your savings
Digibank By DBS:
Zero balance savings account with a superior interest of 7% paid per annum on a balance exceeding above 1 lakh, reaching up to 2 lakhs
Advantages & Disadvantages of Savings Account:
- Savings accounts allow the paying of interest, so it is more beneficial to keep your non-required funds in a savings account than that of a checking account in order that money can have growth.
- Savings accounts, apart from direct cash and demand accounts, are the most fluid investments.
- In addition to savings accounts facilitating or helping with good savings, they also make it much easier to access your storage of funds.
- Due to the easy accessibility to the fund storage, there also lies a temptation to spend it.
- Savings accounts offer lower interest rates than certain others, like Treasury bills, certificates of deposit (CDs), etc. Consequently, the funds should not use Savings Account as their long term store box.