The word savings can conjure up images of money sitting idle in a bank account. But even though you may be saving it, the interest you earn on it is also yours to keep. Banks offer different types of interest rates based on the amount you deposit and how long you stay with them. It is possible to earn higher returns on your deposits by choosing a particular bank over another.
Along with this, it is important to maintain a savings account because of the following advantages:
- Helps you to keep your finances organized
- Allows you to save money and achieve your targets
- Makes it easier for you to track and keep a check on avoidable expenses
- Earns interest at the rate of around 3.0%-3.5% per annum
- Helps to maintain a surplus that can be invested in productive avenues
Best Ways to make the most out of your savings account
1. Choose an account with a high-interest rate
If you have a savings account with a decent interest rate, it's time to choose an account that offers more than just the basics. A high-interest rate savings account is a great way to make your money work harder for you.
If you don't want to take the time to research different rates at different banks and credit unions, there's another option available to you: online savings accounts. You can find high-interest online savings accounts that offer competitive rates, and many banks even allow you to set up automatic transfers from your checking account into the savings account of your choice. The banks which offer these online savings accounts are known as Neobanks, and you can learn more about them below.
Neobanks are the new breed of banks, offering various services that traditional banks don't. In addition to better customer service and mobile apps, neobanking provides a wide range of financial products at lower rates than traditional banks. They provide better interest rates than most of the traditional banks out there. Opening an online savings account with Neobanks requires minimal documentation, making it easier for users to get started.
2. Budget your monthly expenses
When you're putting away money into a savings account, it's important to budget your monthly expenses.
If you don't know how much money is going to be coming in each month or what the expenses are going to be, it's nearly impossible to plan ahead.
The best way to budget is by looking at your previous month's expenses and seeing what you can cut out of that. For example, if you spend Rs.1500 monthly on gas, but don't have any transportation costs coming up in the next few months (because you've already paid for everything), that's a Rs.1500 expense that could go toward your savings account.
3. Set saving goals
The best way to earn returns on your savings is to set goals and then stick with them. If you're saving for retirement, a down payment on a house or a vacation, it's important to know how much you need to save so that you can reach that goal. You can't save if you don't have a goal in mind first.
Of course, if you're just starting out and have no idea what kind of lifestyle or goals you want to achieve down the road, it can be challenging to figure out exactly how much money is needed for those things. It's also important to remember that even though it may seem like the end goal is far off — say, retirement — saving for that big purchase today will help pave the way toward your future dreams.
4. Try and open two or more savings accounts
Opening two or more savings accounts will help you keep track of your money and reap extra benefits. For example, if you have only one savings account, it might be hard for you to keep funds in the account without spending them.
Many people link their primary savings account to online wallets and auto-pay / bill-pay systems for various bills. This is why it helps to keep a second savings account into which you deposit money each month that doesn't get spent. To make your savings achievable, you must avoid linking this second account to any payment system like UPI and don't take a debit card on it as well!
5. SIP in mutual funds
If you want to save for long-term goals, you can start a daily or monthly Systematic Investment Plan in mutual funds from your Savings Account. This will help you benefit from rupee cost averaging, compound money effectively, and focus on ‘time in the market’ rather than worry about timing the market.
If you're looking for a place to stash your cash, your savings account is probably the safest place in your portfolio. This is especially true if you have a lot of money in savings. A yield of 3% might not seem like much, but after many years, it can add up to a considerable amount. If you and your money are happy with average returns of perhaps 1%, this might be something to keep your eye on, though.