Saving Account

• Saving accounts are very simple to deposit accounts. Savings accounts pay compound interest on the existing amount of balance in the account and these interest rates may vary from one bank to another. 
• Almost all banks and financial institutions provide their customers the facility of a savings account as customers deposit a lot of money in these accounts. The minimum amount of money that is required to be in the account to avoid any kind of additional charges or go get the maximum interest rates are variable too as each bank has their own rules. 
• Some banks may maintain an account even if it has zero balance while other banks may require the customer to have a minimum amount of money at all times. This money is essential for the banks and other financial institutions as it raises funds for the bank to give loans and charge interest on them. 
• Thus, this simple business strategy makes a bank so profitable and thus, the institutions put a lot of emphasis on this and make this system very simple and accessible for their customers to maximize profits.  

Key Takeaways

1. It must be noted that the interest earned is considered to be a taxable income on a savings account.
2. Usually, the user can withdraw money whenever they want. There is no limitation on withdrawing cash from an account. 
3. Customers have recognized savings accounts as a reliable, secure, easily accessible option to deposit and withdraw money. 
4. Long-term or restrictive savings instruments usually give higher rates of interest while if withdrawal rates are high, the interest rate will be lesser. 

Disadvantages of Saving Account

The main disadvantages are;

• Usually, low rates of interest are given to the customers so many options to invest their savings somewhere else. 
• Money can be withdrawn at any point in time, so, this often tempts the customers to take out the money and thus, hampers their interest gains and profits. 
• The minimum balance requirements may not be maintained by many people.

Savings Account Interest Rate

• Different banks offer different rates of interest. If a person wants to earn maximum interest, they would have to compare all the savings account interest rates that the different banks are offering and then decide which will be best.
• It must also be noted that the higher the amount is in the account, the higher the interest amount will be. As savings accounts give compound interest, the customer can earn a substantial amount of money if additional deposits are made without fail. 
• As compound interest is calculated by taking the interest rate plus the additional interest amount that a customer has earned over any period, an example can be given as;

Suppose a customer has deposited an amount of rupees 10,000 in a savings account which offers 1% interest. So, after one month, if the amount stays intact in the account, the sum of 10,000 rupees will become 10,100 rupees and then after another month, it will become 10,201 rupees. 

Here, simple interest: A= p × r × t and,

Compound interest: A= P(1+r/n) [p stands for principle amount, A stands for the total amount, r stands for rate of interest and t represents the time which is in months here.

Conclusion

Saving accounts earn a lot of profit for the banks and financial institutions and also makes the customers happy. Today, people are a lot more adventurous and bolder with their money and investments as they use their money on different ventures to earn better profits. But, even with all this, a savings account remains a safe place to save money and secure financial security per se. The banks raise funds from the deposited money and lend loans to other customers. The simple and easy to open nature of this type of account and modest savings account interest rates attracts a lot of customers and people of all income groups save money according to their capacity in these accounts.