Savings bank accounts offer you a lot of conveniences; financial transactions with these accounts are faster. They also help you save some for emergencies. Almost all banks offer savings account facilities to their customers, and opening a bank account is simple. You can open a bank account online or by visiting a branch, depending on your choice. But how much should you have in your savings account? Read on to find out.
How Much Should You Have In Your Savings Account?
The amount of money you keep in your savings account will depend on various factors.
- The Minimum Balance Requirement
Each bank has a different condition for maintaining a minimum balance in your account. Some banks offer different savings account variants to suit your requirements. Others may require you to maintain a balance ranging from Rs 2000-10000 in your savings account, while some may offer zero balance accounts. The amount you keep in your savings account should cover the minimum average account balance required.
- Your Expenses
Your savings account is useful for making regular transactions and payments. Sometimes banks may ask you to open a bank account online or visit a branch when you take a loan to debit your monthly instalments. The balance you maintain in your account should be sufficient for your loan instalments and credit card charges to be debited and for your monthly payments and expenses.
- Liquidity
The savings account also helps you save money; look for a high interest savings account that will help you save and earn high returns. Your savings account should have sufficient funds to cater to your expenses and still provide you with enough liquidity to meet unforeseen expenditures or some emergency without liquidating an investment.
Why Should You Not Keep Too Much In Your Savings Account?
A savings account should not be confused with an investment. Though you should have the required balance in your savings account to take care of the above aspects, keeping too much in your savings account has the following problems:
- Fixed Returns
Returns on savings accounts are fixed. Even if you open a high interest savings account with a bank like RBL that offers you 6.5% annually, a savings bank account does not compare to other investment products. Thus, the purchasing power of your money in the account might remain stagnant with time. It would be best if you distinguished the purpose of a savings account from other investment products.
- Tendency To Splurge
The advantage of a savings account that allows convenient access to your funds can be a disadvantage too. You can withdraw money anytime using a debit card, shop online or order food with the money available in your savings account. Easy access and liquidity can lead to a tendency to overspend, and you might spend more money than you should.
- Financial objectives
When you invest in a fixed or a recurring deposit, it is with a time frame in mind. You know how much corpus you will accumulate at maturity. Conversely, if you have a financial goal, you can use an FD calculator to know how much you should save at the given rate to fulfil a particular objective. As the savings account funds are liquid, they are not well-suited to meet a financial goal.
So What Should You Do?
Savings accounts offer many advantages and are the first step to investments. You can use them to keep the money for the short term, pay your bills and EMIs, or use it at will from anywhere. They are necessary to receive certain government benefits, invest money or receive funds when liquidating your investments. Maintaining the optimum balance in your savings account can help you utilise them well without compromising on the potential returns.
To Wrap Up
Open a high-interest savings account with a bank of your choice after considering your requirements and the facilities they offer. Make sure you maintain the minimum required balance so that you do not have to pay any penalty, but at the same time, ensure that your money does not lie idle.
