So, you have a lot of money. But your earnings are just sitting in the bank account, doing nothing. You could be earning interest on your savings account or using that money to pay off debt, or even purchasing more investments. So why not use it? Here’s what you need to know about saving accounts and how they can help your finances:
Saves on taxes
One of the benefits of opening a savings account is that your interest income from it is tax-free. You don’t have to pay taxes on the interest earned, unlike other sources of income like salary.
In some countries, there are also special tax exemptions for certain kinds of savings accounts, such as student savings account and fixed deposit accounts (FDs). In India, for example, FD withdrawals within five years after its closure are totally exempt from tax, while those in excess are subject to only a 10% penalty. Banks may offer different features, but they all give you free access to your money whenever needed with no strings attached.
Minimum balance scheme
With a minimum balance scheme, the bank requires you to maintain a certain amount of money in your account at all times. This is usually between Rs 50,000 and Rs 1 lakh per annum. Banks have different rules about how much money needs to be maintained.
In some cases, banks will allow you to save up enough money over a period of three months or six months before they charge any penalty for not maintaining an adequate balance in their savings account. However, these accounts tend not to pay as much interest as regular savings accounts do due to their low-risk nature and high liquidity requirements on behalf of customers who want them.
Place to collect funds and make payments
A savings account is where you can keep your money while it’s not being used. You can save up for something special, like a vacation or a new car. Or maybe you have some extra cash and want to earn interest on it. Either way, saving accounts are one of the safest ways to protect your hard-earned cash.
In addition to holding your savings, savings accounts are also great places to make payments online or over the phone because they’re often linked directly with checking accounts where you receive paychecks from work or other sources of income.
Tax benefits
Opening a savings account will help you save money. For example, when you open a savings account, your bank deposits $100 into your account, and you don’t have to pay taxes on that amount.
If you deposit an additional $1,000 in the savings account, the U.S. government won’t tax the $1,000, though it will tax any interest or other earnings from your deposits over time.
This is what SoFi experts say about student accounts, “Banking for you— and future you, too.”
So, if you are looking to save some money and plan on using your bank account as a place to collect funds and make payments, then you should look into opening a savings account. The benefits of this type of account far outweigh those given by other accounts, such as an investment or checking account.