Importance of savings: 6 Reasons to park money in a savings account

Although a lot has been spoken about the importance of savings, people still fail to understand its importance. The COVID-19 pandemic has taught us that life is full of uncertainties, and you can never be sure of what the future has in store. But one thing that you can do is build enough savings so that you can tackle tough times easily.

But are you actually doing this?

As per a “Wealth and Well-being” survey, a whopping 90% of Indians believe that their financial health profoundly affects their overall well-being. This highlights the importance of savings and investing as they can alleviate financial stress and, thereby, contribute towards a greater sense of personal well-being.

However, the same survey also highlighted that a major percentage of Indians fail to save enough for their future. It was pointed out that nearly 50% save only 0-20%, while 20% save between 20-30% of their income. It is evident that most people are yet to understand the importance of savings.

Let us explore the benefits and importance of savings here. 

Benefits of a Savings Account

When considering the importance of savings, you also need to know where and how to save your money. Although there are several ways, you can always start by opening a savings bank account.

As the name suggests, a Savings Account allows you to park or deposit your money safely with a bank. You will be paid an interest on the amount kept in your savings account. Here are a few benefits of having a savings account with a bank –

· A safe haven for your funds
 

The amount deposited in a savings account stays there unless you withdraw or transfer it to a different bank account. Keeping your money in a savings account eliminates the risks associated with cash. Nobody can withdraw money from your savings account without your approval.

· Earn interest on your savings
 

When your money is in a savings account, you start to earn interest. This way, your money keeps growing over time. Usually, savings account interest rates in India range between 3-5%, but some banks can provide a higher rate.

Also read - How to open Savings Account online with IDFC FIRST Bank

· Value added services
 

The most common services that most banks offer include net or online banking, debit-cum-ATM cards, a checkbook, National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), etc. These services allow you to make payments and transfer money on the go.

· Enables automated payments
 

You might have to deal with a lot of expenses each month, from utility and mobile bills to loan EMIs. Keeping track can be a tedious task. If you have a savings account, you can have standing instructions with your bank to pay all your bills on time by deducting the money directly from your account.

· Helps in filing income tax returns
 

When you file your Income Tax Return (ITR), you must calculate your gross income during a financial year and submit proof of this income. By using a savings account to receive all your payments, incentives, or salary, you can easily learn your annual income.

· Keep track of your transactions
 

Keeping track of cash expenses can be a difficult thing to do. However, when you use your savings account to make all your payments, it becomes a lot easier to track monthly expenses and transactions. This allows you to avoid overspending and manage your finances appropriately. To know your transactions during a specific period, you can download your account statement.

Reasons to keep maximum money in your Savings Account

If you only maintain the minimum balance in your savings account, you will not be able to extract its complete benefits. Here is why –

· Earn higher interest when you make greater savings
 

Since your savings account gives you interest on the stored amount, the higher the amount in your savings account, the larger your interest income. Some banks offer a greater savings account interest rate to customers who regularly maintain a high balance.

· Reap the benefits of compounding
 

Compounding interest refers to that which is earned on the interest already deposited into your account. It helps grow your money significantly over time.

· You can avoid unnecessary spending
 

Cash kept at home is easily accessible but can lead to frivolous spending. Hence, it is better to deposit all your money into a savings account. This way, you will learn the importance of saving for your future and can also avoid spending on things that are not necessary.

Also read - Making a budget and sticking to it – Here’s how to do it!

In conclusion

The importance of saving and having a savings account is clear. Thus, you can open an instant savings account with IDFC FIRST Bank and earn up to 7% p.a. interest on your savings. With an IDFC FIRST Bank Savings Account, you can also enjoy unlimited ATM withdrawals with a debit card purchase limit  of up to Rs 6 lakhs and a daily ATM withdrawal limit of up to Rs 2 lakhs. For more details, click here.

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.