The Impact Of Inflation On Your Savings Account

Posted on Monday, July 31st, 2023 | By IndusInd Bank

Inflation shows the cumulative price rise and reduced purchasing power in the country. If you follow the news, you must have heard financial experts using this term a lot in the context of savings and investments. That’s because inflation has corrosive behaviour on all investments, which concerns investors.  

In 2020, the average inflation in India rose to 6.62% due to the Covid Pandemic shutdown. It declined to 5.13% in 2021, once the market caught pace again. Currently, it averages around 5.51% (Jan to May 2023). Visibly, inflation may fluctuate but it always exists, and it affects your net yield on investments.  

Like various investments, bank accounts are adversely affected by inflation. However, savings accounts offer many advantages, including financial growth. This is because they are one of the most liquid assets, offer interest, and are easy to invest in. 

A savings account is a savings facility in which you keep the money with the bank and receive interest regularly. These interest-bearing accounts offer safety and reliability, which make them a good option for parking your hard-earned money. 

Inflationary impact on savings accounts 

Inflation results in a price rise, which means the amount you have deposited in your savings account grows at the prevailing rate; however, its value degrades due to the rising prices of products. 

Owing to the geopolitical situation and the rise in the price of crude oil, the global recession is at its peak.  

In India, the inflation rate fell to 4.7% in April 2023 from 5.66% in March 2023, 6.44% in February 2023, and 6.52% in January 2023. In the last two months, the Reserve Bank of India (RBI) has been able to largely bring the inflation rate under the comfortable zone of 6%, which provides some peace of mind. 

Guaranteed returns from a savings account help you hedge against inflation and keep your money from devaluating. However, you must ensure to choose a savings account that offers interest rates higher than the inflation rate, such as the IndusInd Bank Indus Multiplier Max Savings Account, which lets you sweep your excess funds to an FD account offering higher returns. 

How to save your money from inflation?  

During times of rising inflation, there are certain factors you need to keep in mind to avoid the impact on your savings account. Following are some measures you can take to reduce the effect of inflation on your savings growth.  

1. Use the sweep-in feature: To hedge against inflation and deliver better returns, banks offer a sweep-in feature that automatically books a fixed deposit on your excess funds in the savings account. Thus, you receive an FD interest rate in a savings account. The sweep-in feature offers adequate liquidity and better returns in the long run.  
2. Budget to save more: Budgeting is often overlooked but it is an important aspect that can let you save more even during rising inflation. With an efficient budget plan, you can omit unnecessary expenses, track your spending better, and decide your financial objectives for goal-based savings.  
3. Make long-term investments: Whether it is a deposit or an investment scheme, long-term investments have mostly outperformed inflation to a great extent. With the power of compounding, your investments grow exponentially over the tenure, thus minimising the effects of inflation.   

It is important to understand that at a time of rising inflation, you should keep three to six months of your expenses as emergency savings in your savings account.

IndusInd Bank Online Savings Accounts 

IndusInd Bank offers a range of saving accounts tailored to suit the needs of individuals from all financial backgrounds. From high-interest rate savings accounts to zero-balance accounts, the host of features and benefits align with your daily financial requirements. The bank offers safe avenues to park your funds and earn decent returns on your deposits. These savings bank account options include the following: 

• Indus Delite Savings Account  
• Indus Multiplier Max Savings Account  
• Indus Digi Start  
• Indus Select Savings Account 

You can choose any of these options depending on your monthly income and the types of services you desire. Additionally, the application process is 100% paperless and streamlined. You can open a bank account from the comfort of your home within minutes through V-KYC (Video KYC).  

Along with attractive savings account interest rates, IndusInd Bank also provides multiple offers that you can avail of once you come on board. Here’s what you can get from an IndusInd Bank savings account:  

• Enjoy attractive rates of interest. 
• Choose an account number of your preference (My Account My Number). 
• Withdraw or transfer cash easily using the IndusMobile app. 
• Connect with your bank virtually from anywhere in the world via the Video Branch facility. 
• Benefit from appealing discounts on locker charges. 
• Withdraw cash in the denomination of your choice. 
• Unlock extensive cashback offers, discounts, and rewards on shopping through your debit card. 
• Experience other lifestyle benefits across dining, travel, and entertainment. 

How to open an IndusInd Bank Online Savings Account? 

IndusInd Bank Savings Accounts are convenient to open with instant account access. To open a savings account with IndusInd Bank, you just need your Aadhaar and PAN details. Follow the simple steps given below to sign up for a savings account – 

• Step 1 – Pick an account number of your choice: IndusInd Bank offers the flexibility to choose an account number of your choice via the ‘My Account My Number’ facility. Simply click on ‘Open my Account’ and enter the mobile number that you wish to link with your savings account. This mobile number becomes your account number and, you can later change it to any 10-digit number of your preference. Choose a suitable savings account that aligns with your financial requirements from the range of IndusInd Bank savings accounts. Once you choose your account, click on the ‘Apply Now’ button.  

• Step 2 – Fill in your details: Subsequently, you will receive an OTP on your registered mobile number for verification. You will also need to verify your PAN and Aadhaar details. Once done, you can proceed with filling out your details in the application form.  

• Step 3 – Add funds to your account: After submitting the details, you can access your account and fund it with the desired sum. You will start earning interest on your deposits instantly. 

• Step 4 – Complete Video KYC: V-KYC is an online due diligence process for applicants over a video call. The bank representative interacts with you and records the video along with your PAN card. You may be required to sign over a blank paper for e-signature.  

After completing the aforementioned process, you can access your IndusInd Bank savings account anytime and begin your banking journey. 

Conclusion

A high-yield savings account can help you keep up with inflation as long as inflation is complemented by short-term interest rate changes. Therefore, it is very important to monitor the changing rates provided by the bank on your saving account, as well as the prevailing inflation rate. Accordingly, look for banks that offer high-interest rates that enable your savings to grow faster.  

With an IndusInd Bank savings account, you can beat inflation and experience seamless banking, anywhere and anytime. Apply now. 

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.