Why having multiple Savings Account makes sense?

Savings accounts are a brilliant place to park your funds. They keep your money safe. They are highly liquid and can be easily accessed. Moreover, they ensure that your money does not sit idle. Savings accounts offer interest on your savings that helps to grow your money over time. Different banks offer different rates of interest. Senior citizens and women can even get a higher rate of interest.

As excellent as they are, a lot of people stick to only possessing one savings account. However, multiple savings accounts can offer you greater benefits. Putting your money in more than one account helps you streamline your savings, be financially disciplined, monitor your spending more efficiently, and enjoy multiple benefits from different banks.

So, if you have not yet opened another savings account other than your primary one, here are some reasons why you might want to make a change now.

1. Manage your Savings Better:

Multiple savings accounts allow you to manage your money more efficiently. You can save in different accounts according to your financial and personal goals. For example, you could use one account for a specific purpose like travel, retirement, or a child’s education expenses, and the other for your daily expenses. You could also have a primary account that you use for your regular expenditure, a salary account where you receive your salary, and a joint account with your spouse that both of you can access. In addition, you can have a separate savings account as an emergency fund when you have a pressing financial need that requires immediate liquid cash. There is no restriction on the number of accounts you can have. So, the final decision lies on you, and you can use them as you see fit.

2. Setting Aside More Money:

Savings accounts allow you to automate your savings. You can set up automatic transfers from your primary account to your other secondary savings accounts. This helps to save more money. For instance, you can set up a transfer for the 5th of every month. This will ensure that your money gets saved at the beginning of the month. You can then use the remaining balance for your monthly use. This helps to avoid any kind of overspending. Moreover, if you are only saving in one account and have accumulated a large amount, you may be tempted to spend it. However, having smaller balances in several savings accounts controls this urge.

3. Monitor Your Progress Better:

When you have different savings accounts, you can monitor your progress in a better fashion. You can track individual goals you are saving for, like retirement, a home purchase, etc. A single savings account with lump-sum savings can sometimes be misleading, as it can be hard to gauge how much money you have saved up for an individual goal. In most cases, your goals get overlapped, and you have fewer funds than you think for a particular target. When the time comes to make the purchase, you may find you are short of funds. You may even have to use the money set aside for goal A towards goal B. But with multiple savings accounts, you never lose clarity. If you are behind your target, you can take remedial actions well in time and try to save more. Similarly, if you have already achieved one goal amount and are lagging behind in another, you can distribute your savings to other goals. By doing this, you avoid mismanagement of money and stay focused on your final target.

4. Save on Tax: 

As stated above, every savings account offers interest. This interest is added to your savings. In India, the interest that you earn is taxed. Under the Income Tax Act, 1961, the bank deducts tax at the source. This is deducted when the interest earned exceeds Rs. 10,000 in an account. So, if you use one savings account to save for your future needs, you would likely have a larger bank balance and, as a result, a higher interest. When you pay tax on it, your earnings would be negated by the tax that you pay. But by keeping more than one savings accounts, you will still be earning interest on all these accounts while avoiding the tax levied on them.

5. Enjoy Different Features and Higher Interest Rates:

Most companies have tie-ups with select banks. So, as an employee, you may not have a say in where you open your salary account. If this bank does not offer a higher rate of interest, you will lose out on growing your money. However, you can always open a separate account for your other savings and needs. You can compare different banks and pick the ones that offer the highest benefits and interests. This will facilitate better savings, and you could reach your financial goals sooner than anticipated.

6. Your Savings are Insured: 

The Deposit Insurance and Credit Guarantee Corporation (DICGC) pays either the equivalent of your savings deposit or up to Rs. 5 lakh as insurance money in case the bank fails or shuts. All commercial banks, foreign banks, local banks, and regional rural banks are insured under DICGC. Moreover, both the principal amount and the interest amount are insured till up to Rs. 5 lakh. So, if you distribute your savings among different banks, your money will be insured up to Rs. 5 lakh. If, however, you have more savings stored in just one bank account, you risk losing your savings if the bank shuts down.

How to Use Multiple Savings Banks to Your Benefit?

It is essential to look for banks that offer a high interest rate to save more and achieve your goals faster. For instance, the IDFC FIRST Bank Savings Account offers an interest of up to 7% per annum. In addition to this, you also get a free personal accident insurance cover of Rs. 35 lakh and a free air accident insurance cover for Rs. 1 crore.

Once you have picked a suitable bank, you can open a savings account and start saving. You can automate your savings, fill in your savings account will funds at a steady pace, and live a life free of any kind of financial anxiety.  But make sure to keep track of your money, so you know where you stand at all times. You can use the  IDFC FIRST Mobile Banking App for tracking your expenses.

Saving your money smartly can help you reach your destination quicker and seamlessly. Multiple savings accounts can help you organise your savings so that there is no room for error. Not only does this ensure better money management, but it also lets you enjoy life without having to worry about anything else. So, go ahead and open more secondary savings accounts!

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.