In India, banks offer four main types of bank accounts. These are:
Current Accounts
Savings Accounts
Recurring Deposit Accounts
Fixed Deposit Accounts
Current Accounts
Current accounts offer the most liquid deposits and thus, are best suited for
businessmen and companies. As these accounts are not meant for investments and
savings, there is no imposed limit on the number or amount of transactions that
can be made on any given day. Current account holders are not paid any interest
on the amounts held in their accounts. They are charged for certain services
offered on such accounts.
Savings Accounts
Savings accounts are meant to promote savings, and are therefore the number one
choice for salaried individuals, pensioners and students. While there is no
restriction on the number and amount of deposits made, there are usually
restrictions on the number and amount of withdrawals. Savings account holders
are paid interest on their savings.
Recurring Deposit Accounts
Recurring Deposit accounts, also called RD accounts, are the accounts of choice
for those who want to save an amount every month, but are unable to invest a
large sum at one time. Such account holders deposit a small, fixed amount every
month for a pre-determined period (minimum 6 months). Defaulting on a monthly
payment results in the account holder being charged a penalty amount. The total
amount is repaid with interest at the end of the specified period.
Fixed Deposit Accounts
Fixed Deposit accounts, also called FD accounts, are ideal for those who wish
to deposit their savings for a long term in return for a high rate of interest.
The rate of interest offered depends on the amount deposited and the time
period, and also differs from bank to bank. In the case of an FD, a certain
amount of money is deposited by the account holder for a fixed period of time.
The money can be withdrawn when the period expires. If necessary, the depositor
can break the fixed deposit prematurely. However, this usually attracts a
penalty amount which also differs from bank to bank
Personal Finance: Why to Save: Importance of Saving
We all know that the future is unpredictable. You never know what will happen
tomorrow, next week or next year. Thats why saving money steadily through the
years is so important. Saving money will help improve your financial situation
over time. But more importantly, knowing that you have money stashed away for
an emergency will give you peace of mind. Saving money also opens the door to
many more options and possibilities.
Benefits of Savings
Inculcating the habit of saving leads to a vast number of benefits. Saving
helps you:
Become financially independent: When you have enough money saved up to feel
secure you can start making your choices, from taking a vacation whenever you
want, to switching careers or starting your own business.
Invest in yourself through education: Through saving, you can earn enough to
pay up for courses that will add to your professional experience and ultimately
result in higher paying jobs.
Get out of debt: Once you have saved enough as a reserve fund, you can use
your savings to pay off debts like loans or bills that have accumulated over
time.
Be prepared for surprise expenses: Having money saved enables you to pay for
unforeseen expenses like sudden car or house repairs, without feeling
financially stressed.
Pay for emergencies: Saving helps you deal with emergencies like sudden
health issues or emergency trips without feeling financially burdened.
Afford large purchases and achieve major goals: Saving diligently makes it
possible to place down payments towards major purchases and goals, like buying
a home or a car.
Retire: The money you have saved over the years will keep you comfortable
when you no longer have the income you would get from your job.
Break your spending habit. Try not spending on one expensive item per week, and
put the money that you would have spent into your savings.
Decide that you will not buy anything on certain days or weeks and stick to
your word.