Managing personal finances is one of the most important things an individual can learn. However, keeping track of your earnings and expenses is not always easy and one of the most common mistakes people make is not separating their savings account and salary account. It may seem like a trivial matter, but separating these two accounts can have significant benefits.
In this article, we’ll discuss why it’s necessary to separate your salary and savings account and how doing so can help you achieve better financial stability in the long run.
What is a Salary Account?
A salary account is a type of bank account specifically designed for employees to receive their salaries and is typically opened by employers. It simplifies the process of receiving your paycheque. So, instead of waiting for cash transactions or physical paycheques, receiving your salary on payday is convenient.
What is a Savings Account?
A savings account is one of the basic types of bank account offered by banks and other financial institutions to deposit funds while earning interest on your balance. You can save money for future needs or emergencies by keeping your money safe and secure, allowing you to earn interest on your deposit funds. A savings account helps you to achieve your financial goals by having a separate account to save your money in it and track your progress. It allows you to set aside money specifically for your goals and gives you a clear picture of your progress toward achieving them.
Why is it Necessary to Separate Your Salary and Savings Account?
Both of these accounts have their own set of benefits. But did you know that keeping these two accounts separate can also be highly beneficial? Here are the reasons why it is necessary to separate your salary and savings account:
1. Tracks Your Finances
With a separate salary and savings account, you can track your money better, as you can keep your finances organised by using either account to pay off all your monthly expenses. This helps you better track where your money is going and simplifies the process.
2. Checks on Your Expenses
By keeping your savings account and salary account separate, you can easily keep tabs on the expenses you make in a month. For example, if your salary account is dedicated to making all of the monthly expenses, you can easily track them and try your best to keep unnecessary costs at bay.
3. Helps You Earn More Interest
Nowadays, banks offer interest rates on salary accounts, but they aren’t as high as interest rates on savings accounts. If this is the case, you can have a separate highest interest rate savings account to earn more interest on your savings. Keeping a different salary and savings account guarantees that you get more interest rates on your savings and also get to keep track of all your expenses.
4. Directs You Towards Savings
Having only a salary account to manage your monthly expenses can result in overspending, but a separate savings account can save you from this hurdle. You can set a specific amount as your monthly goal to save. Keeping this account separate from the account you’ll spend avoids over-splurging and sets financial discipline.
5. Increases Your Benefits and Rewards
With two accounts comes added benefits of different facilities like net banking, reward points on debit cards, ATM facilities, mobile banking, online banking, and more. Keeping a salary and savings account separate can help you take benefit of all these facilities on two separate accounts. So, you get to enjoy rewards and discounts on debit cards from both accounts and double the benefits.
Separating your salary and savings account is crucial in managing your finances effectively. Doing so allows you to easily track your expenses and savings, avoid overspending, and save for emergencies or future goals. It is also an excellent way to build discipline and develop healthy financial habits.
With the right tools and mindset, you can make the most of your hard-earned money and achieve financial stability. So, take action today and start separating your accounts – your future self will thank you for it.
Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She’s been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, a digital savings account that offers up to 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on. Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.