Saving accounts features
03 जुलाई 2019
What are the features of a savings account?
A savings account is the first step a person takes toward saving. As the name suggests it is a place where the savings are stored but it is not an investment.
The savings account is the conduit through which investments can be made. But the first step starts from taking the money out of your money box and into a bank.
Why have a savings account?
Rather than keeping money at home in your money box, keeping it in a bank is suitable as it offers interest on the deposit made. This is the main reason why you have a savings account. The interest rate is not high, but it helps in partially softening the blow of inflation. In other words, the money one deposits in the bank are working to give you some return. Not only is the money in the savings account safe and earns interest it has other advantages also.
Features of a savings account
The following are the features of savings account
- First, the money can be withdrawn at any point in time. With ‘Any-Time-Money’ (ATM) counters available across the country, a saving bank account holder who has debit/ ATM card facility can withdraw money from anywhere in the country. This adds a safety element where the depositor need not move around carrying cash in his pocket.
- With e-payment on the increase, the saving bank account helps in regular monthly payments like that of electricity, society maintenance, telephone and mobile bill payment, insurance premium payment among others.
- Salaries can be directly credited to the savings bank account. This helps both the employee as well as the employer. For the employer with a single click of the button, money is transferred to all the employees. For the employee, they are saved the travel to the bank as well as can have the money credited in their account at a faster pace.
- Post-retirement the same savings bank account helps in getting a regular pension.
- Loans that a person takes are generally linked to the savings bank account which is the primary account where his salary is deposited. Direct electronic instructions can be given from the savings bank account or Post Dated Cheques (PDCs) from this account. Savings bank account often eases the process of availing loans.
- Cheque bounce history of the customer’s savings account tells his creditworthiness. A customer with no defaults on loans on his name has a much higher credit rating and finds it easier to get loans.
- Having a savings bank account encourages the habit of saving rather than keeping cash in hand. This discourages impulsive shopping.
- Savings account helps in accessing other financial instruments like online trading, mutual funds investments through direct transfers among others.
- A standing instruction can be given to the bank where if the amount in the Savings Account crosses a particular threshold it will be transferred to any other higher yielding instrument.
- It helps in making travel plans easier by booking tickets as well as hotel bookings through online mode.
- The passbook or electronic statement of the savings bank helps in keeping an automatic tab of where the money came from and where it was spent.
- At the end of the year, it helps in filling your tax returns with the income tax authorities. Since all the transactions are recorded in the bank statement, a salaried employee has the little hassle to file his returns.
Kids Bank Accounts - Features and Benefits
With advancements in banking technology, there are different types of savings accounts that are available to the people. One such type of savings account is a kids bank account. A Kids Bank Account is an account that can be operated by a child below 18 years. The child can thus imbibe a financial savings habit from early on.
Features of a Kids Bank Account
This bank account can be opened for children below 18 years. For children below 10 years, the account can be opened but can’t be operated by the child unless it is jointly operated by the parent or legal guardian. Once the child crosses 10 years, he can manage the account.
The kids bank account becomes inoperative after the child becomes a major. However, banks give the accountholder an option to convert their kids bank account into a regular savings account.
The child gets some of the features provided in a regular Savings Account such as cheque book, pass book and ATM card. However, these come with restrictions.
The kids bank account is linked to the parent or the legal guardian’s account. Each month or at a fixed interval, a sum of money is debited from the linked account to the kids bank account. This way, there is always balance in case the child spends money on the debit card. This linking feature is not available in all Banks.
Each bank has its own limits on the ATM withdrawal allowed and the per day spend allowed in a kids bank account. These safeguards prevent misuse of this account and the possibility that the child will spend more money than a particular limit.
The bank may provide a login Id and a password so that the child can operate internet banking. However, the bank usually gets a signed mandate from the parent or legal guardian before it issues the login ID and password.
These accounts must have a certain minimum account balance. The minimum account balance differs from bank to bank. In case the minimum bank account is not met, the bank charges a penalty.
The bank sends an SMS to the parent or legal guardian every time a transaction is performed in relation to the kids bank account. This helps maintain control.
How to open a savings account for kids
The procedure on how to open a kids bank account is extremely simple. The first step is to find out which bank to open the account with. It is better to open a savings account in a bank in which the parents or the legal guardian have an account. This helps the bank to link the two accounts and to put in a standing instruction to auto debit the parents or guardian’s account for funds (if linking facility is available).
Once the bank is decided, the account can be opened by filling up an account opening form on the bank’s website. Once this form is filled up, someone from the customer care department of the bank will contact you to get documents from you. Some of the documents required are:
KYC documents for parent or legal guardian
KYC documents for child
Passport size photographs of the child
Duly completed application form
In case an online application procedure is not possible, you can visit a branch, fill the form and submit the documents to open a new account.
Benefits of Kids Bank Account
A kids bank account is an excellent way to teach your child fiscal responsibility. Through this bank account, your child can learn how to operate a bank account, especially when the funds are limited.
This account teaches a child the value of budgeting since there is a limit on the transactions that can be done every day. There is also a limit on the funds in the account and a minimum account balance that has to be maintained.
Some Banks provide free insurance for the child on opening the kids bank account
Banks may have auto sweep in facility that converts excess balance into a fixed deposit so that the earnings on the account are maximized.
Kids Bank Account Tax Implications
As per the Income Tax Act, 1961, a child’s income from investments made in his name by parents is clubbed with the parent’s income. Unless the income is from the child’s own skills, in which case it is taxed in the child’s name.
Whatever interest is earned on the savings account balance or the fixed deposit through sweep in, will be clubbed with the parent or the legal guardian’s income. This income is clubbed with the working parent’s income. In case both the parents are working, this income is clubbed with the parent whose income is higher.
However, the Income Tax Act also exempts Rs. 1,500 per child for clubbed income. This provides a little bit of relief from taxation. It is important to consider children’s bank account tax as well before opening the account. However, the benefits of opening an account and teaching your child financial lessons trumps the amount paid in terms of tax on savings bank account interest.
Savings Account- Features and Benefits
A savings bank account is the most basic bank account available. It is an account that allows you to pool in your finances and manage them. The funds are available to be withdrawn at any time. With the different needs and requirements of the customers, banks have begun offering different kinds of savings accounts to meet these different needs. Some types of savings accounts are:
Regular savings account
Kids savings account
Womens Savings account
Institutions, Government savings account
Basic Savings Bank Account (BSBD)
Senior Citizens Savings Accounts
Rural Savings Accounts/ Jan Dhan accounts
Here are some features of savings account:
A savings account comes with a passbook and cheque book feature
You can receive payments and make payments from your savings accounts
Auto debits and auto credits can be set up from your savings accounts
Savings bank account holders can access internet banking and mobile banking for their needs
Banks offer ATM cum debit cards to savings bank account holders
A savings bank account earns low interest rate but allows the customer the freedom to withdraw funds at any time subject to a limit on monthly withdrawals.
It is possible to pay bills from your savings account
Banks also send transaction alerts to their customers via SMS and email
What are the benefits of a savings account?
While a savings account has a lot of utility, it only earns interest at 3.5% to 6% per annum. In such a case, are there any benefits of having a savings account? The answer is yes. There are many benefits of opening a savings account. Let us consider them.
Here are the benefits of having a savings account:
One of the benefits of opening a savings account is that it offers you liquidity..
Safety of funds
A savings bank account is a safe avenue to keep your funds rather than keeping it on hand where it is susceptible to get lost or stolen. Another important point to remember is that each account is insured by the Deposit Insurance and Credit Guarantee Corporation for up to Rs. 1 lakh.
Additional earnings because of auto sweep facility
Most banks have an auto sweep facility where funds above a particular limit are automatically converted into a fixed deposit. These funds earn interest at fixed deposit rates as compared to regular savings rate. By enabling this feature, the depositor can get full benefits of keeping money in a savings account.
Automatic debits for payments
Banks allow customers to set up automatic debits for utility payments and bills. In such cases, the utility company or telecom company raises a demand with the bank and the bank automatically debits the bank account. This is a convenient way to make payments on time. When you take a loan, you can set up an auto debit facility from your savings account where the installment will get debited from the savings bank account and
Auto credits for investment incomes
One of the benefits of keeping money in a savings account is that it can be linked to a demat account and other investments. In such cases, the income from dividends and interest gets automatically credited to the bank account. This convenience ensures all incomes get pooled in one account.
Convenient fund transfers
It is extremely simple to make fund transfers from a savings account. There are different modes of a fund transfer which are easily available in both internet banking and mobile banking. A savings bank account holder can transfer funds using NEFT, RTGS, IMPS and UPI.
There are benefits of a joint savings account. Having a joint account provides greater flexibility since all the joint holders can sign cheques and operate the bank account. It makes it easy to track spends and incomes. A joint account can be maintained for household incomes and expenses which is excellent for financial planning.