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Introduction
Investing, savings, taxes and retirement are all aspects of financial planning. Financial planning is the process of evaluating all aspects of your finances and making a specific financial plan that will reach your goals. In this entire module we will discuss the different types of savings and investment avenues available to us.
Savings Bank Account
A Savings Account is an interest-bearing bank account. The main idea of this account is to promote the habit of savings within people. Benefits of a savings account include - moderate interest on deposits, low risk, convenience, ease of use etc. At the time of opening the account, the account holder gets a cheque book, a passbook and a Debit cum ATM Card. This account has become popular because of its liquidity and low risk. There is a cap on the number of withdrawals and deposits in this account. A Savings Account channels idle household cash into savings. There are also different types of Savings Bank Account that we will discuss in our next section.
How to Open an Account
The following documents are required to open a Savings Bank account:
- Proof of identity - Passport, Driving license, Voter’s ID card, etc.
- Proof of address - Passport, Driving license, Voter’s ID card, etc.
- PAN card
- Form 16 (only if PAN card is not available)
- 2 latest passport size photographs
Guarantees
The interest rate in a savings bank is guaranteed up to the first ₹5 lakhs balance in the account. This rate varies across banks since the Reserve Bank of India deregulated the savings bank deposit interest rate on October 25, 2011. Banks are now free to determine the interest on the balance in a savings bank account, which has to be uniform for all types of accounts up to ₹5 lakhs in an account but varies for accounts with a higher balance.
