Savings Account for Low-Income Earners: Tips to Start Saving

Daily expenses are on the rise. If you're not saving money today, you may find it difficult to manage your financial life in the future. It becomes far more challenging for low-income earners to find ways to save. There are many who live on month-on-month salary. And that's quite scary - especially at a time when layoffs are common. 

Taking note of this problem, we have laid out a few tips and strategies that may help low-income earners save more effectively. Consider these as tips and not advice - ultimately the onus is on you to employ the strategies to enjoy a stress-free financial life. 

Savings Account: The First Step to Start Saving

Start your savings journey by opening a Savings Account. It helps you park your money in a safe and secure way, and earn interest on the account balance. Here's a tip - open a high-interest Savings Account. Deposit 10% to 20% of your salary every month. 

Try not to withdraw funds from this account unless you face any financial emergencies. Consider the account as a gateway to long-term savings.

Budget Saving for Effective Financial Planning 

Set a target. Determine how much you want to save each month and identify areas where you can reduce expenses. Creating a budget and tracking your spending can help you figure out surplus expenses. Also, try to keep your expenses within the budget. Avoiding impulsive purchases can pay dividends in the long-term.

Try Zero Balance or Basic Savings Account?

Most Savings Accounts come with a minimum balance maintenance requirement. Not maintaining the minimum balance may incur penalties. Low-income individuals may find it difficult to adhere to such guidelines. To avoid penalty for non-maintenance of minimum balance, go for a basic Savings Account. Such accounts don't come with any minimum balance requirement. However, basic Savings Accounts generally come with limited features and benefits. Consider this factor before opening a zero balance Savings Account.

Open a Fixed Deposit to Make Your Money Work for You 

You can maximise your savings by opening a Fixed Deposit account. FDs offer higher interest rates compared to Savings Accounts. Also, since the FD interest is calculated based on the compound interest method, you can enjoy higher returns at the time of maturity. Additionally, you can invest based on your financial goals and liquidity needs - FDs come with a tenure ranging from 7 days to 10 years. 

Automate Your Savings 

Open a Recurring Deposit (RD) can work as an excellent tool for low-income earners to save money regularly. A fixed amount of money would be automatically debited from your Savings Account towards your RD. It will save in a more disciplined manner. Also, RD works great as an emergency fund. You can use your RD account to build corpus for emergency expenses. Recurring Deposit tenure usually ranges from 6 months to 10 years. 

Manage Your Debts 

Staying in debt isn't a bad thing. Having a strong credit history results in higher credit score, which translates to quick access to credit. However, not being able to manage your debts properly can be a problem. And for low-income earners, staying in heavy debt can be disastrous.