An All-Encompassing Answer to the Question- What is Saving?

The question of what is saving garners different answers from different individuals. That said, savings is a huge part of everyone’s life, without them things become very difficult. 

In layperson’s terms, savings is simply the difference between one’s income and expenditure. However, expenditure also means different things to different people. Some treat it as meeting fixed expenses like rent, food and transport while others include many more aspects. 

People save money for many reasons. There are two types of goals: short and long-term. Short-term goals see individuals actively saving money to buy things like phones, computers, cars, and so on. In contrast, long-term goals involve more expensive things like homes, treating illnesses, and others. Another popular method is the investment of these savings. This process helps the saved amount grow over time, but it also implies that the money will be out of reach for a set duration. 

In this article, readers will learn the meaning of savings and its importance as well. A basic introduction to the savings account along with its variants is also present in the blog. Readers will also learn which accounts they are eligible for. 

Additionally, information regarding the savings rate and its calculation will also be shared. Towards the end, we help distinguish between savings and investments and also talk about the pros and cons of savings accounts.

What are Savings?

Every working individual strives to earn more money to better their standard of living, which involves spending more. That said, expenditure isn’t the only goal. Everyone wants to keep something aside for the future. In layperson’s terms, savings is the amount left over after meeting all expenses and obligations. These include necessities like food, clothes and shelter, plus other important aspects of life like health, transportation, leisure and much more. 

The question What is saving will bring out different answers from different people. The reason being the motivation to save for every person is different. Some save up to secure their future and do not give much importance to short-term goals, while others focus more on short-term rather than long-term ones.

A key tool needed to save money is a savings account. The next section will elaborate on that.

What is a Savings Account?

A savings account is the most important tool to initiate and carry on with one’s financial savings. These accounts are services offered by every bank in India. A savings account is great for keeping money safe and letting it grow over time. The growth aspect comes into play when banks start paying interest to the account holders. 

Opening a savings account is a great way to save for short-term needs. Most savings accounts are very flexible and come in handy during emergencies as well. 

Operations of a Savings Account

Banks are termed as institutions which lend out money for specific purposes. It may be in the form of a personal loan, home loan, education loan or any loan for that matter. Well, the money to be lent out needs to come from somewhere. That’s where savings accounts come in. The money people store in these accounts is lent out. For that specific reason, banking institutions pay interest on the sum stored in these accounts.

Typically, the percentage offered by a bank as interest varies and is almost never fixed except for individual services that offer a fixed rate. These fixed-rate accounts have many clauses attached, and most aren’t very flexible. That said, a banking institution can change the rate of interest at any time.

There are many different variations of a savings bank account, but all of them are aimed towards individual savings. 

Types of Savings Accounts

Indians have many options to choose from, and each of these banks offers a wide variety of savings accounts. These accounts are often classified by the demographic they appeal to in the case of senior citizens, children and women. Other instances see classification by purpose in the case of zero balance or salaried accounts.

Regular Savings Account

The regular savings account is the most common service offered by banks. These accounts make up most of the saving function in every Indian household. That said, these accounts often come with a minimum balance requirement to avoid fines and enable interest earning. Moreover, daily withdrawals are limited, but individuals may deposit on as many occasions as they, please. Below are some of the offers from top banks:

BANK	INTEREST RATE	MINIMUM BALANCE REQUIRED
SBI	3.5%-4%	₹25,000
AXIS	3.5%-4%	NA
BANK OF BARODA	3.5%-4%	QUARTERLY AVG. BALANCE OF ₹500 IN RURAL BRANCHES AND ₹1,000 FOR URBAN BRANCHES
PNB	3.5%-4%	QUARTERLY AVG. BALANCE OF ₹500 IN RURAL BRANCHES AND ₹1,000 FOR URBAN BRANCHES
CANARA BANK	4%	QUARTERLY AVG. BALANCE OF ₹500 IN RURAL BRANCHES AND ₹1,000 FOR URBAN BRANCHES
HDFC	3.5%-4%	₹10,000 FOR METROS, ₹5,000 FOR URBAN AREAS AND ₹2,500 FOR RURAL AREAS
KOTAK BANK	5%-6%	NA
YES BANK	5%-6.25%	NA
DBS BANK	4%-7%	NA
STANDARD CHARTERED	4%	NA
CITIBANK	4%	₹25,000
SOUTH INDIAN BANK	4%	NA
INDIAN BANK	3.5%-4%	₹250 FOR NO CHEQUE FACILITY AND ₹500 FOR CHEQUE FACILITY
IDFC	4%	₹25,000
ANDHRA BANK	4%	NA
UCO BANK	4%	AVG. OF ₹250-₹1,000 FOR RURAL AND URBAN AREAS, RESPECTIVELY
IDBI	4%	₹5,000 FOR METROS, ₹2,500 FOR URBAN AREAS AND ₹500 FOR RURAL AREAS

Salary Savings Account

This savings account is normally started by the enterprise an individual works for. Their monthly salaries will be credited to this account, as the name suggests. An added bonus for this type of account is that no minimum balance clause is attached to it. However, if no salary is credited to the account for a stretch of three months, it will be converted into a regular savings account. This account is the answer to what is saving for salaried individuals.

Senior Savings Account

This account type is exclusively meant for senior citizens. This service comes with many privileges to make their lives easier, including a higher interest rate. Seniors can even link this account to their pension and receive monthly aid. Below are some of the senior citizen accounts offered by top banks:

BANK	ACCOUNT NAME
AXIS BANK	SENIOR PRIVILEGE SAVINGS ACCOUNT
IDBI BANK	JUBILEE PLUS (SENIOR CITIZENS) ACCOUNT
HDFC BANK	SENIOR CITIZENS ACCOUNT
CANARA BANK	CANARA JEEVANDHARA
IDFC BANK	SENIOR CITIZENS SAVINGS ACCOUNT
KOTAK	GRAND- THE SAVINGS PROGRAMME FOR THE 55+

Children and Minor Savings Account

As the name suggests, this account type is catered towards minors who are yet to turn 18 years of age. These accounts are typically joint accounts that children operate with their parents. This great initiative helps teach the little ones that money saved is money earned. Below are the variants offered by the top banks in India:

BANK	ACCOUNT NAME
SBI	PEHLA KADAM AND PEHLI UDAAN
AXIS BANK	FUTURE STARS SAVINGS ACCOUNT
HDFC BANK	KIDS ADVANTAGE ACCOUNT
IDBI	POWER KIDZ ACCOUNT
INDIAN BANK	IB SMART KID SB ACCOUNT
CANARA BANK	CANARA JUNIOR SAVINGS ACCOUNT
UCO BANK	UCO SMART KIDS SAVINGS BANK SCHEME
PNB	JUNIOR SF AND VIDYARTHI SF ACCOUNT
KOTAK	JUNIOR-SAVINGS ACCOUNT FOR KIDS
IDFC	MINOR SAVINGS ACCOUNT
SOUTH INDIAN BANK	JUNIOR SAVINGS
ANDHRA BANK	KIDDY BANK, LITTLE STARS AND TEENS

Women’s Savings Account

As the name suggests, this variant has been made specifically for women. This initiative was started by the Government of India and is now carried out by most national and private banks. This account allows businesswomen to take loans at special interest rates. Below are some options available at the top banks in India:

BANK	ACCOUNT NAME
AXIS BANK	WOMEN’S SAVINGS ACCOUNT
PNB	PNB POWER SAVINGS
HDFC BANK	WOMEN’S SAVINGS ACCOUNT
KOTAK	SILK-WOMEN’S SAVINGS ACCOUNT
SOUTH INDIAN BANK	MAHILA PLUS SAVINGS BANK
IDBI BANK	SUPERSHAKTI (WOMEN’S) ACCOUNT

Who is Eligible to Open Savings Accounts? 

One needs to open a savings account to start individual savings. People can choose any bank based on preference, interest rate, relationships, and other factors. However, each bank has its own eligibility criteria. Below are some basic guidelines that should be adhered to.

• Minors (under the age of 18) can open savings accounts with their parents.
• A regular savings account holder needs to be at least 18 years of age.
• Hindu Undivided Families and Foreign Nationals can also open savings accounts in India. 

Which Documents are to be Submitted?

As is customary with any legal or financial matter, a set of documents must be submitted to the bank for verification before opening a savings bank account. These are:

• Proof of Age and Identity (Passport, Aadhar, Driver’s Licence)
• Proof of Address (Voter’s ID, Driver’s Licence, Utility Bill)
• Senior Citizen’s Card (for senior citizen’s savings account)
• Two passport-size photographs. 

How to Calculate your Savings Rate?

The savings rate, simply put, is the percentage of the income an individual saves. This can be calculated annually or monthly as per preference. Mathematically, all you need to do is divide the amount of your savings (monthly or annual) by your gross income (monthly or annual as per the savings figure) and then multiply the result by 100 to get a percentage. 

The total amount of savings should include all types of funds and schemes that an individual uses. This includes things like the provident fund (also including the employer’s half) and retirement funds. Individuals need to use their gross income before taxes in order to get a clearer result.

Knowing one’s savings rate is essential for higher potential savings in the future. 

Why is Saving Important?

What is saving can be answered by the money set aside every month after meeting one’s expenses or even by investing saved money over time. Of course, the answer varies from person to person. That said, savings are very important in order to meet short and long-term goals like mobiles, cars, homes, education and more. 

Investing money from your saved amount is a great way to counter the rate of inflation. But on the other hand, keeping money in a savings account will also earn interest annually. Moreover, money kept for the future can also help battle emergencies like the COVID-19 pandemic. 

Ways to Save More Money

Savings can be started with the smallest amounts, regardless of income. Everyone should do individual saving as it ensures a comfortable and stress-free life. Here are some ways to save more money:

• Keeping track of expenses is a great place to start.
• Keep a set percentage allocated towards savings in the monthly budget.
• After identifying the key areas of expense, cut down on the futile ones.
• Set small and realistic saving goals.
• Prioritise your expenses.
• Operate using a savings bank account that will help to earn interest.

How is Saving Different from Investing?

People tend to use the terms invest and save interchangeably, but in reality, the meanings are quite different. 

What is Investment?

Investment refers to the purchase of an asset that earns money over time. The usage of capital is essential in investments; this is what facilitates returns in the future. Investments include a wide range of things like rent, mutual funds, shares, and much more.

What is Saving?

As stated before, savings is simply the amount left over after meeting all the expenses and obligations. This is the money one keeps aside for short-term goals. 

Which is Better?

Overall, the main difference is using money to generate higher returns in investments and keeping money aside after meeting necessary expenses in savings. However, the risk is an important point of difference between the two. Savings is a complete risk-free plan, whereas investments come with carrying levels of risk. 

The percentage of growth or returns is something investments are great at, considering the amount of risk they come with. Savings can never equal that rate but also have zero risks involved.

The final point of difference is that investments aren’t as liquid or flexible as savings. However, one cannot just take away amounts from an investment.

Pros and Cons of Savings Accounts

Most people often focus on just the merits and completely ignore the negatives while making a decision. However, keeping the importance of savings and investment in mind, one must always look at both sides of the coin.

Pros

Earn Interest: As stated above, savings accounts help the holder earn interest on the amount deposited annually. Different banks offer different rates of interest, but they are pretty competitive. 

Safety: Savings accounts come with zero attached risks, unlike investments. Individuals can keep depositing money in an account without a worry in the world. 

Affordable: Savings bank accounts are the most affordable form of investment. Most top banks charge minimal maintenance fees when it comes to regular savings bank accounts.

Cons

Variable Interest Rates: Interest rates offered by banks on savings accounts are subject to change. The discretion completely lies with the bank and is also affected by a majority of factors, like the state of the economy.

Easy Access: Most people would classify the flexibility of a savings account as merit. However, the ease with which one can take money out of a savings account is also detrimental to savings in the long run.

Minimum Balance: On the other hand, the minimum balance requirement on most savings accounts locks in a particular chunk of the deposit. Holders are still free to withdraw from the minimum balance. However, that will attract heavy fines and fees over time.

All in all, the broad perspective of this blog was to emphasize how important savings are. Having some money stowed away always comes in handy during tough times. There are many different types of savings and some of us can use banks as they offer various options. There are many different types of accounts people can apply for. Additionally, calculating our savings rate is also pretty simple and investing is a great way to raise that. 

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