A bank account is one of the most essential tools for your financial well-being. From receiving pay cheques and paying bills to making purchases and saving for the future, it plays an important role in your financial life. Moreover, the convenience of online banking, mobile apps, and 24/7 access to ATMs has further simplified the banking experience.
However, simply having a bank account is not enough to ensure healthy financial habits. In fact, many people are unknowingly compromising their financial health by merging their savings and Current Account transactions.
Both savings and Current Accounts have distinct purposes and keeping these two accounts separate is crucial, but why? Here are some fundamental reasons why you should never merge transactions between your savings and Current Accounts.
Better management of income and expenses
If you mix your savings and Current Account transactions, it becomes difficult to keep track of your income and expenses.
For example, if you use your house down payment savings for business operations, you may not be able to afford your dream house at the desired time, thereby losing a critical opportunity.
By having separate accounts, you can easily classify your transactions into different categories, such as savings, expenses, and salary, to understand how much you are spending and saving. This is important for financial planning, especially if you run a business.
Avoid unnecessary fees and charges
Banks often have different fees, minimum balance requirements, interest rates, and additional perks for savings and Current Accounts.
By mixing your transactions between the two accounts, you may end up paying extra fees if you accidentally fail to maintain minimum balance requirements or exceed the transaction limit. So, while it is important to open a Current Account online for your business or freelancing needs, it is equally crucial to keep it separate from your savings account to avoid unnecessary charges.
A savings account usually earns interest, which can add up over time and help your money grow. This interest can be an invaluable tool in building your wealth or acting as an emergency fund to meet unexpected situations. By keeping your savings separate from your Current Account, you can track how much interest you are earning and avoid any nonessential expenses that might drain your savings.
Generally, Current Accounts do not earn interest. However, many Current Accounts offer the ActivMoney facility, which automatically converts idle funds exceeding a certain threshold into a fixed deposit, allowing you to earn interest on surplus funds. Make sure to check your bank’s Current Account requirements to see if they offer this feature.
A budget is an important aspect of financial management. Separating your savings and Current Account transactions makes it easier to plan your budget. When you know how much you are spending on different expenses, such as rent, groceries, or shopping, you can adjust your budget accordingly.
With proper financial planning, you can invest in important things, such as a new home, business, or education.
To sum up
Savings accounts are ideal for daily personal transactions, building an emergency fund, or long-term savings goals. Current Accounts help businesses manage high-volume transactions, such as paying bills, and salaries, and making purchases.
Both savings and Current Account opening procedures can be completed online through banks’ websites and mobile banking apps. Just make sure to use each account for its intended purpose to maximize the benefits of both accounts.
While convenience may force you to combine transactions in one account, it is essential to have a clear distinction between your savings and Current Account transactions. This helps you to track your spending better, save for future financial goals, avoid unnecessary charges, and maintain financial stability.