PNN
New Delhi [India], April 4: Savings accounts are among the most widely used and simplest of financial management tools. Although they're simple, there are some myths and misunderstandings surrounding them. Such myths create a lot of confusion, preventing people from maximising their savings. In this blog, we'll break down some of the most common myths associated with savings accounts to help you cut through the misinformation.
Myth 1: Savings Accounts Are Only for Emergency Funds
Reality: We all know that a savings account is great for building your emergency fund and maintaining liquid savings. A savings account can help as a stepping stone for short-term goals, such as saving up for that vacation, a new gadget, or even a wedding. Others use savings accounts to park money temporarily before moving it into other investments. Savings accounts are great for easier financial management through automatic transfers and standing instructions without tying up your money.
Myth 2: Savings Accounts Offer No Real Returns
Reality: It's true that savings accounts generally pay lower interest rates than other types of investments. They are, however, built to deliver safety and liquidity, not high returns. Today, many banks in India offer high interest rates on savings accounts, particularly on larger amounts. Other banks even offer a special variant of their regular savings account with tiered interest rates, which can make them a better option than letting your cash sit idly. Furthermore, interest is compounded quarterly, allowing for consistent growth over time.
Myth 3: You Need a Minimum Amount to Open a Savings Account
Reality: This has become a myth since most savings accounts require maintenance of a minimum average balance. There are many options available in the market these days that do not require a large initial deposit to open accounts. You can open a zero-balance savings account, which requires no initial deposit. Plus, you don't even need to keep a high balance to avoid low balance penalty charges for having these accounts. Such accounts are useful for students, senior citizens, and people of the economically weaker sections who wish to start saving but do not want the constant pressure of holding a minimum balance.
Myth 4: Savings Accounts Are Not Safe
Reality: Savings accounts are among the safest places to hold your money. In India, banks come under the Reserve Bank of India (RBI), which ensures strict compliance with safety norms. Also, as per the Deposit Insurance and Credit Guarantee Corporation (DICGC), depositors are insured for accounts with a maximum amount of Rs. 5 lakhs per bank at any point in time. This makes it so that your hard-earned money will be safe if a bank fails in the very unlikely occurrence that ever happens, providing you peace of mind.
Myth 5: Savings Accounts Don't Offer Additional Benefits
Reality: Modern savings accounts offer more than simply saving money. These days, banks offer free insurance plans, cashback on debit card utilization, discounts on shopping portals, reward points programs, and overdraft facilities for emergencies, among other things. These extra perks make savings accounts far more flexible than a lot of customers think.
Myth 6: You'll Lose Interest if You Withdraw Frequently
Reality: Frequent withdrawals may negatively impact the growth of your savings, but past interest you've earned doesn't disappear. Interest on savings accounts is calculated daily and credited quarterly. However, do keep in mind that part of the reason to maintain higher balances is to earn higher returns in tiered rate accounts. That is why strategic deposits can maximise growth and, at the same time, maintain liquidity.
Myth 7: You Must Visit a Bank Branch to Open a Savings Account
Reality: Most banks now let you open savings accounts digitally. So you don't have to visit the branch every time you want to open a new savings account. It is quicker and smoother than conventional KYC (Know Your Customer) verification with a digital approach. This has made banking easier than ever, especially for busy people who are professionals or are living in remote areas.
Myth 8: Savings Accounts Are Only for Older People
Savings accounts are not only for adults. They are also for people of all ages. If you go to a bank, they have special accounts designed for children, students, and senior citizens to provide them with features for their unique banking needs. Kids' savings accounts, for instance, can instill financial responsibility, while student accounts offer additional perks like no balance minimums and lower fees. Senior citizen accounts have additional interest rate perks, and salaried savings accounts may have cashback offers.
Final Thoughts
Savings accounts are an invaluable component of financial planning, yet common myths around them diminish their real value. Our goal is to shed light on these misconceptions so others can make better choices with respect to their finances. Whether you're just starting a savings journey or searching for ways to utilize your existing accounts better, savings accounts enable safety, flexibility, and added advantages for modern people.
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