For most individuals, visiting a bank and opening a savings account, or opening an online savings account from their home, is usually the start of their interaction with the banking system. A savings account and its different types are primarily an avenue for funds and transactions. However, there are other purposes for which they may also be used. Not knowing about them might lead you to underutilize the benefits of your account.
Let’s understand how a savings account can be used to do something more than just playing a role in your financial transactions:
A safe avenue for funds
The funds kept in a savings account will be there unless withdrawn or paid out. A savings account may not have the best interest rates when compared to other financial products. But the biggest benefit is that it is liquid. You can withdraw money up to a particular limit at any point of time in a month. This can work out to be beneficial for salaried employees and senior citizens. They can withdraw for monthly expenses and then earn interest on the remaining balance.
A space for emergency funds
You can plan for future expenses or financial emergencies. Simply set up your high-interest savings account as an emergency fund. The amount will be available for use at any time, with no hassle. There is no limit to the amount invested in the account. Therefore, one can maintain enough funds in it for covering, say, the necessary expenses for three to six months.
To maintain an income-generating account
Unlike a current account, a savings bank account also earns interest. The balance earned can be used to add to your overall income. You may also get to benefit from a sweep out facility that will offer a higher interest rate. You may utilize this facility for a specific period to contribute more to your income.
A way to leverage the relationship with your bank
Your banking relationship can be leveraged for availing other benefits offered by the bank. This will depend on the size of the savings account or its types. Credit cards, pre-approved loans, overdraft facilities, discounts on certain purchases, waiver of service charges, and invites to special events are a few of the benefits you could expect.
To enjoy the provision of value-added services
Along with a passbook facility, net banking, and cheque book facility, banks also provide value-added services and benefits. One of these benefits is an option of availing different types of debit cards. Other benefits could be zero limits on a particular facility, like free and unlimited ATM transactions and special debit card offers. By choosing an account that gives these benefits, you can benefit from the extra value.
A gateway to making investments
A savings account can be used for setting up a SIP to invest in mutual funds. You can also make systematic transactions, such as opening a bank RD (recurring deposit) for a particular date and a pre-determined period. You may directly start investing after opening up your savings account online.
Some uses of a savings account can particularly help you save time too, along with money:
To set up bill payments
A savings bank account works as your own cash management system. Third-party utility bill payments, tax payments, loan EMIs, and insurance premiums can be paid seamlessly. Internet banking portals can provide a quick snapshot or financial dashboard of the customer. This can give you an idea of the different investments mapped to the bank account. Once you finish opening a new savings account, you can take the aid of the bank’s digital services.
To help with taxation
All transactions are recorded in your savings bank account. You can trace income funds and match them to the income. The bank will also provide an annual bank statement. This will give a record of the total income earned. It will include earnings in the form of any profits, salary, gift, rent, dividends, etc. Your account is directly linked to your income tax account, making it an essential part of your taxation process.
Investing is not just about having all your eggs in different baskets. It’s also about ensuring that you make the best use of the baskets. Utilise the above benefits of a savings account to the fullest to create more value for your money and your time too.
Click here to know more about the benefits of IDFC First Bank Savings account.