What are the benefits of keeping a Salary and Savings Account separate?

Both salary and savings account may offer the same benefits. However, they do have some differences that can be identified by comparing some of their features.

Here are a few distinguishing features:

Savings bank account

• It may have daily withdrawal limits.
• Customers are required to maintain a minimum cash balance, unless it is a zero balance account.
• A savings account can be opened by anyone, no matter their economic strata, what they do for a living, and their residential status. Unlike other banking/financial products, they come with fewer restrictions. Even minors can have a savings bank account opened by their parents or guardians.

Salary account

• Employers open a salary account for their employees. Individuals can also open a salary account in their preferred bank (If the bank has a tie up with the individual’s employer).
• There is no minimum balance requirement.
• It comes with higher transactional limits. For instance, IDFC FIRST Bank’s Platinum Plus and Classic Plus salary accounts offers a daily POS limit of ₹6 lakhs and cash limit of ₹2 lakhs.

When managing finances, keeping two separate accounts could seem like too much effort. But there are some advantages of keeping both accounts separate.

Let’s look at the benefits of having a separate savings and salary account:

Organised Finances

A separate salary and savings account can help streamline your budget. It can make it easy to track expenses. For example, by using a single account to pay utility bills, you can track all your bills via the respective account. Instead, if you make all your transactions from one account, it might get difficult to track the money at the end of the month. Having separate accounts could help you better manage your money.

More savings

With a separate salary and savings account, you can set a goal for savings each month. Based on the target, you could consistently transfer money from your salary account to your savings account every month. This will help you get a picture of how much you’re saving. In case of emergencies, you can directly check your savings account balance to know how much you can afford to spend. Without a second account, you would have to take the additional efforts of calculating the instant liquidity you could afford from your single account.

Having a separate account for savings could also help you keep your regular withdrawals restricted to your salary account. This would help you grow your funds in your savings account.

Increased rewards and benefits

These days, salary accounts, by default, come with a host of facilities such as mobile banking, Netbanking, ATM facility, online banking, and more. A savings account will also offer these facilities. You would, therefore, have access to the same facilities on two accounts. Discounts and rewards that come with a debit card or netbanking could be enjoyed on both your accounts. Therefore, by using the features correctly, you could double the benefits.

Higher interest/profit rate

You could benefit from the difference in interest rates on your savings or salary account. Depending on the banks where you have your account, you could benefit from a higher interest rate on one of the accounts. Shifting your money to the account with a higher interest rate would help you earn more on it. One bank could also offer different interest rates for a salary and savings account. You could open a second account in the same bank and then transfer money to the account with a higher interest rate. Insurance benefits

This benefit is exclusive to IDFC FIRST Bank Salary Accounts, where you enjoy personal accident and air accident insurance covers. The Platinum Plus salary account offers a personal accident coverage of ₹50 lakhs and air accident insurance of ₹1 crore. The Classic Plus salary account provides personal accident cover of ₹35 lakhs and air accident cover worth ₹1 crore.

Tips for establishing separate accounts for salary and savings
 

Follow these crucial tips to establish and manage separate accounts for your salary and savings effectively:

Research interest rates

Interest rates directly impact how much your savings will grow. Savings accounts typically offer interest on the deposited amount, and this can vary significantly between different accounts. Choose an account with a competitive interest rate to maximise the potential of your hard-earned money.

Account benefits

Check features like cashback offers on purchases, reward points, discounts on services, automatic transfers, financial planning tools, and good customer support. Premium digital banking capabilities also play an important role. These help you complete the zero-balance salary account opening online process from any location and manage your finances 24/7.

Associated fees

Stay aware of any fees associated with the accounts. This could include monthly maintenance fees, transaction fees, doorstep banking charges, etc.  Analysing these fees will help you avoid unexpected charges and maintain cost efficiency. Note that while a 0-balance salary account might reduce maintenance fees, other fees, such as transaction and service charges might still apply.

Same bank option

Consider opening both your salary and savings accounts at IDFC FIRST Bank for ease of management. Having both accounts in one place can simplify the transfer of funds between them and may also qualify you for bundled benefits or lower fees. Moreover, this can provide a more integrated view of your finances and make it easier to monitor and manage your money.

Regular deposits

You can set up an automatic transfer from your salary account to your savings account right after each payday. This practice, often referred to as "paying yourself first", can help you consistently save a portion of your income. Over time, even small, regular deposits with a competitive interest rate can grow into a substantial sum.

Money managed well is an important part of growing your wealth and keeping it secure. Keep your savings and salary account separate to reap more benefits and manage your finances better.