In today’s world, as medical and other emergencies like job loss can strike anytime, holding a savings account is of paramount importance to meet such times of distress. While the current pandemic situation has just reinforced the requirement to open a new bank account to use it as a source of funds for rainy days, parking money in them for long has been an essential option.
Here are some top reasons to open an offline or online savings account:
- Safeguard your funds
With rise in income comes the temptation of spending a higher amount on unnecessary items. With a savings bank account, you can protect your surplus fund not just for future requirements but also to lower your own uncontrolled urge of spending more.
Savings account is a safe platform to park your money owing to the insurance protection by DICGC. Also, it is a prudent avenue to earn higher interest rates if you park your money in small savings schemes or high yield savings accounts.
- Avail the benefit of higher rate of interest
Parking your surplus funds in a savings bank account can provide you with an attractive rate of interest. At present, savings account interest rates can go as high as 7 % p.a. in the case of small finance banks, up to 6 % p.a. for private sector banks and up to 3.35 % p.a. on public sector banks. Safeguarding your money in high yield savings bank accounts like the small savings banks can help avail inflation beating returns and are best avenues for parking your emergency fund owing to their high liquidity feature.
- Best for short term financial goals
Opening a savings account is a prudent option to manage your funds and budget your savings for the long term. In case you want to invest for short term crucial goals like funding overseas travel, arranging down payment for home or car loan, saving for a big-ticket item, then a high yield savings account is the best bet. This is because of the account’s high capital protection feature and assurance to provide a higher interest rates than conventional savings accounts.
- Maintain adequate emergency fund
Any unexpected calamity may strike any time, which can financially affect you. Thus, to meet such situations it is important to have a strong financial footing because the funds requirement for mitigating unexpected emergencies are usually high. Savings account is one of the preferred avenues for saving up for your rainy days owing to its assurance of capital protection and higher liquidity than any other avenues. Note that your emergency fund in a savings account should be at least 6 times of your monthly mandatory expenses.
Savings accounts provide various benefits in the form of high liquidity, convenience, and interest rate than any other parking mode. Note that in such avenues, the risk of losing out the parked money is even low due to the DICGC (Deposit Insurance and Credit Guarantee Corporation) protection of up to Rs 5 lakh. This makes it a perfect instrument to park your funds for emergencies and short-term goals.