Every bank has come up with several variations of savings accounts. But these are just basic savings accounts, where you can leave your money and earn an interest in the range of 3.5-7%, depending on the amount and the bank. The basic function of a savings account is payment transactions such as equated monthly instalment (EMI) for your home loan, systematic investment plan (SIPs) and rent transaction. All these savings account, depending on the services, come with a certain fee. The only low cost account is the salary savings account (zero balance account) that your employer opens for you.
Most people find it difficult to manage their money. They end up spending more just because they have immediate access to the money in their savings account. Pick a savings account based on specific requirements. For instance, if you tend to spend more because the money is easily available, open another account for savings. Every month, you can transfer the money from one account to the other that is meant for investments and savings. Consider opening it in banks that give higher interest rate on savings deposit. If you can manage finances despite the money being accessible, you don’t need another account.
Earn higher interest rate
Savings bank account is not an investment instrument. It is a product where you can see your cash flow—income and expense. You shouldn’t leave money idle in it. The best way to earn higher interest is to transfer the money to investment instruments such as fixed deposits and mutual funds, based on your asset allocation and risk profile. For instance, the State Bank of India will give you 3.5% interest an annum, if you leave the money in a savings account. A liquid fund, on the other hand, will give you interest in the range of 6-7% an annum, although the returns are not guaranteed.
