Benefits of Keeping a Separate Savings and Salary Account

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You've likely heard the saying, "Don't put all your eggs in one basket." This timeless advice applies to your finances too. While a single bank account might seem convenient, separating your savings and salary accounts offers greater control and organisation. Just like separate baskets can protect your eggs from mishaps, maintaining two accounts can help you track spending, prevent mindless spending, and automate saving to reach your financial goals. This blog will explore the benefits of having separate savings and salary accounts.

What is a Savings Account?

A Savings Account is an effective financial instrument offered by banks and other financial institutions that allows you to deposit your money and earn interest on it. It is a safe place to store cash and grow it over time while providing easy access to your funds whenever needed. In exchange, you earn a modest interest rate on your balance.

Savings accounts are designed for accumulating savings rather than everyday spending, so they often have limits on the frequency of withdrawals. Additionally, banks typically require you to maintain a minimum balance to avoid penalty fees. These accounts are practical for building an emergency fund (like medical bills or car repair), saving for future goals (retirement, child’s education, etc.), or earning passive income.

Key Benefits of Savings Accounts

• A Savings Account gives you easy access to your money whenever you require it.
• One of the significant benefits of Savings Accounts is you earn modest interest rates on your deposits.
• Keeping your money in a Savings Account is safer than holding it in cash, as it's protected from loss or theft. Moreover, the account is insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) for up to ₹5 lakh.
• You can set up automatic payments for telecom, electricity, gas insurance, loans, and other expenses, ensuring timely payments without the hassle.
• Transferring money from a Savings Account is straightforward with options like NEFT, RTGS, and IMPS payments.
• Joint Savings Accounts offer flexibility, allowing all account holders to manage the account. This makes it easier to track spending and income, especially for shared household finances.

What is a Salary Account?

A Salary Account is a special type of bank account provided by your employers to receive your monthly salaries smoothly. Your employer partners with a bank to set up these accounts, so you don’t have to open one on your own. These accounts usually come with features like electronic fund transfers, debit cards, and online banking. They often have zero or low minimum balance requirements, higher ATM withdrawal limits, loan facilities, and discounts on other bank products.

Key Benefits of Salary Accounts

• The main benefit of a Salary Account is convenience - your salary gets deposited directly into the account, eliminating the need for picking up a check.
• You can earn a modest interest rate on the money parked in your salary account.
• Salary Account holders often enjoy free withdrawals, free fund transfer transactions, and waived or discounted account maintenance charges.
• Salary Account holders can access special offers, discounts, and benefits on financial products like credit cards, loans, and insurance.
• Employees can arrange automatic bill payments directly from their salary accounts, ensuring timely payment of essential bills like telecom, electricity, and more.

Difference Between Salary Accounts and Savings Accounts

Here’s a table summarising the difference between Salary Accounts and Savings Accounts:

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Key Benefits of Keeping Separate Salary and Savings Accounts?

Now that you know the benefits of Savings Accounts and Salary Accounts and their differences, let’s explore the advantages of maintaining these accounts separately:

1. Organise Your Finances:

   Separating your salary and Savings accounts can help you organise your finances better. It makes it easier for you to track expenses. For instance, dedicating a single account solely for bill payments, such as electricity, telecom, and gas allows you to monitor your expenditures clearly. However, if you use just one account for everything, it can be harder to keep track of your money each month. Having separate accounts can help you control your cash flow more effectively.

2. Increase Your Savings:

   Separating your salary and savings accounts offers a clearer view of your finances and fosters healthy savings habits. You can set monthly savings goals and transfer money consistently from your salary to savings account. This helps track your savings progress and easily assess available funds during emergencies. It also simplifies budgeting, as you can easily monitor your spendable balance in your Salary Account.

   Moreover, having a dedicated Savings account discourages dipping into your saved funds for everyday expenses, allowing them to grow steadily over time.

3. Maximise Rewards and Benefits:

   Salary Accounts typically include mobile banking, net banking, ATMs, and online banking. Savings accounts offer the same services. This means you can access these features with both accounts, potentially maximising your benefits if used strategically.

4. Earn More Interest:

   You can take advantage of varying interest rates between your savings and salary accounts. Different banks offer different rates, so moving your money to an account with a higher interest rate can increase earnings. Additionally, a bank might provide different rates for salary and savings accounts. Opening a second account in the same bank and transferring funds to the higher-interest account could be beneficial.

Tips for Opening Separate Salary and Savings Accounts

Here are some tips you should keep in mind while opening a separate Salary and Savings Account:

• Research to find the bank with the best interest rates.
• Consider the features and benefits of Savings Accounts and Salary Accounts.
• Watch out for any associated or hidden fees.
• Consider using the same bank for both accounts for easier access.
• Deposit a fixed amount into your savings after each paycheck.
• Transfer any bonuses from your Salary Account to your savings.

Summing Up

Keeping separate savings and salary accounts has many benefits for managing your money. It helps you stay organised, save regularly, and make the most of interest rates. By treating your Savings Account as a separate account, you'll be closer to reaching your financial goals. So, don't rely on the "one basket" approach and enjoy the benefits of separating your financial accounts.

Frequently Asked Question

1. Can we have a Salary Account and a Savings Account simultaneously?

   Yes, you can have both a Salary Account and a Savings Account simultaneously, either in the same bank or in different banks.

2. Can I keep my Savings in a Salary Account?

   Yes, you can keep your savings in a Salary Account if your bank allows it. Typically, if your new employer has a banking arrangement with the same bank for Salary Accounts, you may be able to convert your Savings Account into your Salary Account when you change jobs.

3. Can I receive my salary in my Savings Account?

   Yes, you can receive your salary in your Savings Account, but Salary Accounts offer additional benefits that regular Savings Accounts do not.

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