Savings Account Calculator
In a savings account, when someone earns interest, the bank is paying the person money to retain their cash, which is been deposited there. You can use a savings account calculator to estimate the end balance and interest of your savings account. The savings account calculator considers multiple varied elements such as tax, inflation, and various periodic contributions. In general, it is essential to regularly save your earnings in order to meet daily expenses, emergencies, future purchases, and investments. Whatever the reason for saving, if you don't plan for such events beforehand, it may result in poor financial outcomes. In other words, saving involves the process of storing a portion of your current income to meet your varied needs in the near future. Once one has established a savings account for meeting daily expenses, the individual can commence investing their funds monthly to get a future income.
Use Fintra's Savings Account Calculator to estimate the growth and future value of your savings and/or investment over time. Our calculator uses the formula of compound interest, providing options for monthly, quarterly, half-yearly and yearly compounding. In addition to this savings account calculator, Fintra has a useful calculator for compound interest as well if you desire to use it.
In this blog, Fintra talks about the following topics:
- Savings Accounts
- How many contributions should you make towards your Savings Accounts?
- Regular Savings Account Calculator
- How to use Fintra's Savings Account Calculator Online?
Savings Accounts
In India, savings accounts are the type of bank account that can earn interest on the deposited funds (savings). They can be opened at most banks, credit unions, and/or other financial institutions. However, they'll vary in traits such as synergy with checking accounts of the same institution, annual percentage yield (APY), and minimum balance requirements. Some financial institutions might offer a few incentives like waiving monthly fees for opening savings and checking accounts.
Although, at times, savings accounts are linked to checking accounts, there are a few key differences. For example, checking accounts are deposit accounts through financial institutions allowing the withdrawal or depositing of funds. Being highly liquid, mostly the funds can be withdrawn without penalties, and they mostly don't pay interest. Some checking accounts, even if they do pay interest, it might be the lowest interest rates. On the other hand, savings accounts have some limitations on withdrawals, and might require maintenance of a minimum balance to avoid penalties.
One of the key characteristics of savings accounts is their ability to earn interest at rates higher than those offered by checking accounts. Due to this, savings accounts are generally most useful to store funds one doesn't require immediately, such as savings or emergency funds. Unlike checking accounts, savings accounts aren't as liquid, but they are still one of their beneficial aspects. When compared to the relative liquidity of cashing bonds, and withdrawing from retirement accounts, selling stocks, or other assets, savings accounts are easier to access when cash is required.
Experts suggest it can be a wise decision to have both at the same time- Use the checking account to store funds for immediate needs and use a secondary savings account to hold any excess cash, which can earn interest in the meantime.
How many contributions should you make towards your Savings Accounts?
While deciding how much contributions you should make towards your savings accounts, the following are some general guidelines that might assist you:
- Emergency Fund Rule: It is a wise decision to first have enough in savings for covering at least three to six months' worth of living expenses that could also double as insurance for emergency spending like paying medical bills. If suddenly unemployment occurs, there should be enough savings to back you for the entire period until you find new employment.
- 10% Rule: From each paycheck, set aside 10% to place into savings.
- 50-30-20 Rule: In this rule, it defines that 50% of your income must go towards necessities such as house/rent, food, and bills, 30% could be allocated for luxuries such as dining and entertainment, while the last 20% can go towards paying off debt or savings.
These guidelines are just an outline, there are many varying factors to consider for every individual, such as currently how much they have in savings, how much they make relative to how much they spend, the future forecast of their short and long-term spending, and many other things.
Regular Savings Account Calculator
One of the toughest parts about saving money is getting started. At times, it can be difficult to find ways to make savings and use them to achieve financial objectives. Thus, as described above, it is essential to contribute at least 10% to 15% of net earnings towards your savings reserve.
Following are simple steps that might help to develop a realistic savings plan:
Set your Savings Goals
The first step to take in order to begin your savings is to set your savings target. Until you have a set goal, all plans will be directionless. Begin by deciding what is your savings target so that financially you'll be secure after retirement. In the interim, you could consider the key life events such as the following:
- Purchasing a new car
- Purchasing a new house
- Your marriage
- Becoming a parent
- A vacation with family
- Your child’s higher education
- Child’s marriage
- Medical emergencies
- Other contingencies
Record your Expenses
The second step involves knowing your expenses and omitting the unnecessary ones. Keep a record of all expenditures in a month, even including the smallest of the expenses you make. Once you have noted all the data, categorize the expenses under various heads such as groceries, electricity, transportation etc.
Make a Budget
After getting a total for each head, begin to jot down the unnecessary spending in each of them. Create a budget to limit your spending, ensuring to keep some ratio of the money in an emergency reserve. Be sure to include expenditures that do not happen every month but after regular intervals like routine health checkups and car servicing.
Choose Savings Strategy
You may consider the following savings techniques if you are planning savings for short-term goals:
- Open standard bank savings account for gaining easy access to cash
- Debt mutual funds
- Bank fixed deposits
- Recurring deposits
When saving for long-term goals, consider the following:
How to use Fintra's Savings Account Calculator Online?
Fintra's Savings Account Calculator will help in assessing the amount needed to save monthly or annually to achieve your financial goals. To obtain accurate results, the calculator needs you to fill in your current savings, the time in years in which you desire to achieve your goals, the periodic savings amount, savings frequency, and the bank's current annual interest rate.
Conclusion
From the above information, we can conclude that beginning to make savings at early stages in life is one of the wise things one can do to keep your future secured. Although there are no limits to how many savings accounts can be funded, it does not mean it is a wise idea to perpetually do so. There are various other methods to earn higher passive income. For example, making investments in bonds, stocks, or real estate are some good avenues to invest in as they offer higher return rates than savings accounts in the long run.
