You have paid your bills and you are still left with the money, then firstly you need to pat your back and secondly you need to keep that money safely. One of the finest options to keep extra stash of money safely and see it grow is opening a savings account. Savings account is a basic type of account offered by financial institutions in India. In a savings account an investor deposits money in a savings bank account and in return he/she earns interest in return. Many people, especially the younger generation, are avoiding opening a savings account because in India the interest rate has been slashed by almost 50%, which is historic low. One reason for low interest in the year 2020 could be due to coronavirus pandemic. Due to low interest rates the other advantages of savings accounts can not be overlooked. To help you make a decision, today we will discuss the advantages and disadvantages of savings accounts which will help in maximising the money.
Pros
Safety of your money: Depositing money in savings accounts was safe and it is still safe. Once you deposit the money into a savings account you do not need to worry about your money because every depositor is insured by Deposit Insurance and Credit Guarantee Corporation (DICGC) for up to Rs 5 lakh. All commercial banks as well as foriegn banks which operate in India are insured by DICGC.
Slowly and gradually wealth will grow: There is no doubt that the interest rate on savings accounts has been at its lowest, however, financial institutions guarantee 100% return on the account. As there is saying that something is better than nothing, so getting low returns is better than earning nothing and stopping the growth of your wealth.
Liquidity of cash: In savings accounts there is a feeling that your money is your money as you can withdraw the amount any time you want. If you need the cash urgently then you just need to go to an ATM or bank branch and withdraw the money. However, if you have invested money in any other savings scheme like FD or mutual funds then you may have to wait for a day or two and it is a complicated process as well.
Low minimum account: In many banks savings accounts can be opened by depositing only Rs 100-Rs 1000, there is no limit set to maximum amount. The account can be opened by anyone at any time, even when they have low income.
No lock-in period: Money in savings accounts can be kept for as many months or years you wish. There is no lock in period in savings accounts as it in other saving schemes.
Cons
Minimum balance required: A savings account holder has to maintain a minimum balance in their account if they fail to do so then they will be charged with fees. The minimum balance requirement fees can range anywhere between Rs 100-Rs 600. The minimum balance fee for every bank is different.
Interest is compounded: Many banks calculate the interest on a daily or monthly basis which means that your account is not realized always. Whereas there is an option available to select whether you wish to calculate your interest cumulatively or non cumulatively in other investment options.
No tax savings: Money which you have kept in a savings account earns interest but that interest income is taxable, even there is no tax deduction at sources (TDS). Also, there is no account which is customised in a way that you can save tax. For example, there is a Tax Saving FD scheme which helps people avail deductions for up to Rs 1.5 lakh.
Conclusion: Now that you have a list of advantages and disadvantages it will make it easy to choose whether to deposit the amount in a savings account. The decision of each person will be dependent on the different factors to consider wisely if opening a new account or continuing the account will help in maximizing the money.
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Aditya Pathak Joined: January 21st, 2021 Articles Posted: 1
