A savings account is a useful financial tool that helps you manage your finances in multiple ways. It offers a secure place to keep emergency funds, helps you save your future goals, provides liquidity 24/7, and generates passive income through interest. However, people often make common mistakes with their savings accounts that slow down their financial progress.
Remember that as a savings account holder, it is your responsibility to use it smartly to fully leverage its advantages. On that note, here are some prudent tips to help you avoid common pitfalls and make the most out of your savings account.
Read the terms and conditions carefully
Banks often include various fees, limitations, and account requirements in the fine print. For instance, some accounts may charge you for not maintaining a minimum monthly balance, or they might limit the number of free transactions per month. So, read the terms carefully to avoid unexpected surprises which can affect the growth and accessibility of your funds
Choose savings accounts with competitive interest rates
A savings account with a high interest rate means you earn much better returns on your deposits. You can choose the INDIE Savings Account to get an interest rate of up to 6.75% p.a. and enjoy a range of benefits, such as:
- A 100% digital process to open a savings account online
- Fixed deposit interest rates of up to 7.75% p.a.
- No minimum balance requirement
- INDIE Youniverse loyalty program
- Quick fund access through INDIE’s MY Credit Line
- Secure debit cards for safe transactions
Simply download the INDIE app by IndusInd Bank, enter your Aadhaar and PAN card details, and open a savings account online within a few minutes.
Leverage fixed deposit strategies to earn more
One of the most useful savings account tips is opening multiple fixed deposits to reduce risk and earn higher returns. Some strategies you can adopt with FDs are:
- Tax-saving FDs: Opt for these to get deductions under section 80C of the Indian Income Tax Act, 1961, but remember they come with a five-year lock-in period.
- Auto-sweep FDs: Any surplus funds from the savings account automatically transfer to an FD and earn higher interest.
- Senior citizen FDs: If you are a senior citizen, choose these FDs to earn higher interest rates and tax benefits.
- FD laddering: Create FDs with different maturity dates to get regular income and liquidity while taking advantage of different interest rates over time.
Automate your investments from your savings account
The auto-pay feature enables automatic contributions from your savings bank accountv to your chosen investments like mutual funds, stocks, bonds, or retirement funds.
Decide an amount you can comfortably afford and schedule the transfer for just after your payday. This will help prevent the temptation to spend instead of save and will let your funds enjoy uninterrupted compounding growth.
Build an emergency fund in a high-interest savings account
A robust contingency fund lets you manage emergencies without having to dip into long-term savings or incur debt during emergencies. It is important to not keep your emergency funds in low interest saving accounts as the growth may not keep pace with inflation.
Calculate the total amount you need to cover your living expenses for three to six months. Then, deposit this sum into a savings account with high interest rates. Adjust your contributions accordingly if your earnings grow or expenses increase.
Manage your savings account via mobile banking apps
Digital banking apps offer a single platform to handle your bank account and savings. Here’s how using it can help avoid common pitfalls:
- Set up alerts for low balances, large transactions, or suspicious activity.
- Use spending trackers and budgeting tools to find areas to reduce expenses and increase your savings.
- Automate bill payments to avoid late fees and maintain a disciplined saving habit.
- Capitalise on 24/7 banking to make timely financial decisions and boost your savings.
Having a healthy savings account is a crucial part of financial health. However, it is important to do it prudently to avoid common pitfalls. So, implement the tips outlined above to make your savings account work harder. Enjoy more security, growth, convenience, and peace of mind.