One of the often asked questions is, can a savings account make you rich. Today, we will dig deeper and understand whether the savings account helps us become rich or increase our wealth, but before that, let us know, what is the savings account and what is its advantages.
A savings account is the most basic account that allows individuals to deposit money and withdraw it, all while earning interest. In other words, it is an interest-bearing deposit account held at a bank. These accounts safety and reliability make them an excellent option for parking cash you want available for short-term needs. Almost all banks offer this facility. It helps in saving for a short-term goal like buying a transport or going on a trip or merely sweeping surplus cash you don’t need in your checking account so it can fetch more savings account interest rates elsewhere.
Features and benefits of Savings account
- They offer a nominal interest rate in the range of 2% to 5%, which helps in increasing.
- They become the medium for carrying financial transactions.
- Individuals are required to maintain a minimum average balance in these accounts.
- These accounts are accessible to people of all the ages. The savings account can be opened by an Indian citizen, NRI and also foreign nationals. Individuals should be above 18 years of age. Further, a savings account can also be opened for minors by their parents/guardians.
- Minor can also open the account, provided they have the KYC documents.
- Provides several benefits like Transfer funds easily using IMPS/NEFT/RTGS/UPI to any bank account, Personalized cheques, Internet Banking and Phone Banking facilities, Several offers and discounts on Debit cards.
Now that we have understood what savings account is and what are its feature and benefits, let’s know can they help one to increase his wealth or become rich.
Is saving account helpful in increasing the wealth?
The increase of real wealth depends upon the interest rate and the inflation rate. If interest amounts earned represent how much your money grows, inflation rates represent how much the level of prices has increased or how much your money has lost its value.
Most banks Savings account apart from all the facilities mentioned above offer an interest rate of around 2% to 5%. However, the inflation rate if above the 5% does not provide any benefit. The interest earned due to the savings account gets nullified due to the inflation. Even in a favourable situation, when the inflation rate is hovering in the range of 3%, the savings account does not provide a significant benefit.
Now let’s imagine a hypothetical situation where inflation does not exist, and money does not lose its value. Even in that situation, the highest rate of 5% won’t be able to increase wealth with significant margins. Thus So, individuals must not rely on savings account for increasing wealth.
One can deny all the great benefits saving account bring with them, they are helping the customer in multiple ways, however, they are not the right instrument to increase the wealth. Individuals should rely on Stock Market, Mutual Funds, Post Office Monthly Income Scheme (POMIS), National Pension System (NPS), Public Provident Fund(PPF), Fixed Deposit (FD), Senior Citizen’s Saving Scheme (SCSS) and RBI Taxable Bonds for increasing wealth.