Savings accounts are a great way to save your money and earn interest on it at the same time. Additionally, they provide convenient access to your funds whenever necessary. It’s worth noting that these accounts come with various features, benefits, and prerequisites. In this article, we’ll delve into the differences between these savings accounts and aid you in selecting the most suitable option to meet your requirements.
What are the Types of Savings Accounts?
There are 7 major types of savings accounts to choose from:
1. Regular Savings Account
A regular savings account is a financial account where individuals can deposit money and earn interest on their balance. This type of account allows for easy access to funds, with the ability to withdraw money at any time without any additional restrictions or requirements. It is a popular choice for many people as it is a simple and straightforward way to save and grow their money.
Features of Regular Account
- A savings account allows you to earn interest on the money you deposit
- You can easily access your money at any time and from any location
- Debit cards, internet banking, and mobile banking can be used to make transactions and transfer money
- There may be a minimum balance requirement to avoid penalties
- Account holders receive a passbook and a cheque book to help track and make payments
- Savings accounts are a secure way to save money.
Pros and Cons of a Regular Savings Account
|Provides the opportunity to earn interest on deposited money, allowing for potential growth of savings
|Interest rates may be relatively low, limiting potential earnings
|Allows for easy access to funds, with the ability to withdraw money at any time without restrictions or requirements
|There may be penalties for falling below a minimum balance requirement
|Offers a range of convenient banking services, such as debit cards, internet banking, and mobile banking, for making transactions and transferring money
|Interest earned may be subject to taxes, reducing overall earnings
|Account holders receive a passbook and a cheque book, helping to track and make payments
|Inflation can erode the purchasing power of saved money over time
|Savings accounts offer a secure way to save money, with protection of deposited funds through insurance.
|Interest rates may not keep pace with inflation, leading to a loss of value in saved money over time
Who Should Open a Regular Savings Account?
A Regular Savings Account is a basic type of bank account that is suitable for individuals who want to save money and earn interest on their savings.
2. Salary Savings Account
An account specifically created for salaried employees where their monthly salary is deposited by their employer is called a salary saving account.
Features of Salary Savings Account
- A salary savings account does not require a minimum balance to be maintained.
- As a holder of a salary account, you can receive a cheque book/passbook, monthly e-statements, a debit card, phone banking services, credit card offers, and access to net banking.
- A salary account can be used to pay bills for utilities such as electricity, water, and gas.
- The holder of a salary account may be eligible for various loan offers.
- A salary account can also be used to transfer funds to other accounts.
Pros and Cons of a Salary Savings Account
|No minimum balance requirement
|May have limited interest rates
|Convenience of receiving monthly statements
|May have limited banking options
|Access to various banking services
|Limited eligibility for non-salaried clients
|Eligibility for various loan offers
|Limited account benefits
|Ability to transfer funds to other accounts
|May have fees for certain services
Who should open a Salary Savings Account?
A Salary Savings Account is designed for employees who receive regular salaries. Typically, the account is opened by the employer on behalf of the employee and the salary is credited directly to the account.
3. Zero Balance Savings Account
A zero balance savings account is a type of account that does not require the account holder to maintain a minimum balance. With this type of account, the account holder is able to withdraw money at any time, even if it leaves the account empty.
Features of Zero Balance Savings Account
- Zero balance accounts come with various services such as net banking, a cheque book/passbook, and a debit card.
- Account holders are not charged for the first few ATM transactions every month.
- These types of accounts are suitable for individuals who earn enough to cover their basic needs.
- Zero balance accounts promote saving habits.
Pros and Cons of Zero Balance Savings Account
|No minimum balance requirement
|May have lower interest rates compared to other savings accounts
|Flexible withdrawal options
|Limited ATM transactions per month
|Comes with additional services like net banking and debit card
|May have additional fees for certain services
|Promotes saving habits
|May not be suitable for individuals who have higher income and can maintain a minimum balance
Who Should Open a Zero Balance Savings Account?
Individuals who earn enough to cover their basic needs and are looking to start building a savings habit may benefit from opening a zero balance savings account. These accounts are also suitable for individuals who may not have a steady income or have variable income streams.
4. Kids Savings Account
A child under the age of 18 can have a special savings account called a kid’s savings account. This account must be linked with a parent or guardian’s account to maintain a minimum balance.
Features of Kids Savings Account
- Encourages children to save money
- Provides benefits similar to a traditional savings account
- ATM/Debit card is also issued to the child, with daily withdrawal limits
- Any balance in the child’s account that falls below a certain threshold will be maintained by deducting the amount from the parent’s bank account
- After the age of 18, a child’s savings account becomes inactive and must be converted to a regular savings account
- Minimum account balance must be maintained to avoid penalty
Pros and Cons of Kids Savings Account
|Encourages children to save money
|Linked with parent/guardian’s account, which may limit the child’s financial independence
|Teaches financial responsibility from a young age
|Requires minimum balance maintenance to avoid penalties
|Provides an opportunity for children to learn about banking and saving
|Limited withdrawal limits may not be suitable for children who need to access their savings frequently
|Comes with an ATM/Debit card for easy access to funds
|Any balance falling below a certain threshold is maintained by deducting the amount from the parent’s account
Who Should Open a Kids Savings Account?
Parents or guardians who want to teach their children about saving and financial responsibility may consider opening a kids savings account. These accounts can also provide a safe and secure place for children to save money they receive as gifts or allowances. However, it is important to keep in mind that these accounts are linked with a parent or guardian’s account, which may limit the child’s financial independence.
5. Family Savings Account
A family savings account is a type of bank account where multiple members of a family can combine their individual savings accounts into a single account. Each member of the family has their own login and can manage their own savings within the account. The account can be opened by any family member, including spouses, children, siblings, in-laws, grandchildren, grandparents, or parents.
Features of Family Savings Account
- When you combine multiple savings accounts under a single ID (a family savings account), you must maintain a minimum balance on all of the accounts included in the combination. The minimum balance will be equal to the highest minimum balance requirement among the individual accounts.
- In case of an emergency, a family savings account allows you to transfer funds from another account to cover a payment. For example, if you wrote a check for an amount that exceeds the balance in your account, the bank will transfer funds from another linked account to cover the difference.
- The primary account holder (the person who opened the family savings account) will be charged a penalty if the minimum balance is not maintained.
- Even if one of the accounts included in the family savings account is a salary savings account (which typically does not have a minimum balance requirement), a minimum balance will still be required for the combined family savings account.
- If the primary account holder wants to leave the family savings account, the account can be dissolved with the consent of all other account holders.
- The number of savings accounts that can be linked to a single Family ID may vary depending on the bank.
- An individual account holder can leave the family group by notifying the bank.
- The privacy of each individual account holder is protected within a family savings account.
- The primary account holder can be chosen by the family members and will receive a Primary customer ID.
Pros and Cons of Family Savings Account
|Allows multiple family members to combine their savings into a single account
|Penalty for not maintaining the minimum balance
|Provides an opportunity for families to work together towards a common financial goal
|The minimum balance requirement may be higher than the individual account holders are used to
|Can help family members who may have trouble maintaining a minimum balance to avoid penalties
|The number of accounts that can be linked may be limited by the bank
|Allows for easy transfer of funds in case of emergencies
|Family members may have different financial goals and priorities
|Protects the privacy of each individual account holder
|The primary account holder has control over the account and can dissolve it with the consent of all other account holders
Who Should Open a Family Savings Account?
Families who want to work together towards a common financial goal, such as saving for a large purchase or a family vacation, may consider opening a family savings account. This type of account can also be useful for families with members who have trouble maintaining a minimum balance on their individual accounts.
6. Senior Citizen Savings Account
A senior citizen savings account is a financial product designed for individuals over the age of 60. These accounts often offer higher interest rates on deposits made by account holders and may also provide tax breaks for senior citizens.
Features of Senior Citizens Savings Accounts
- A senior citizen savings account can be opened by individuals who are over the age of 60.
- Individuals who are over the age of 55 and have retired early through superannuation or the Voluntary Retirement Scheme may also be eligible to open a senior citizen savings account.
- Retired military personnel may also be eligible to open a senior citizen savings account if they meet the requirements.
- Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not eligible to open a senior citizen savings account.
- A senior citizen savings account can be opened as a joint account with a spouse.
Pros and Cons of Senior Citizen Savings Account
|Higher interest rates offered on deposits made by senior citizens
|May not be available to Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs)
|May provide tax benefits for senior citizens
|May have restrictions on the number of withdrawals allowed per month
|Allows for joint accounts with a spouse
|May require a minimum balance to be maintained to avoid penalties
|Can be opened by individuals over the age of 60 or those who have retired early through superannuation or the Voluntary Retirement Scheme
Who Should Open a Senior Citizen Savings Account?
Individuals over the age of 60 or those who have retired early through superannuation or the Voluntary Retirement Scheme may consider opening a senior citizen savings account.
Who is eligible for opening a savings account?
- Indian residents
- Hindu Undivided Family
- Parents/guardians on behalf of the child