Comparison of Saving Money in Deposits and Savings?, People are often confused, what is the difference between deposits and savings.
They both keep money in the Bank, right!? It’s the same with 20% tax. In fact, the two concepts are very different. Banks also generally provide different interest rates for funds in deposits and savings.
Time Deposit, Savings Can Be Taken Anytime
The most important difference between deposits and savings is the flexibility of withdrawals. As a Time Deposit, a time deposit cannot be withdrawn at any time like a savings account. Deposits are designed with a certain tenor (term), there are 1 month, 3 months, 6 months, and 12 months.
If you deposit money in 3 months deposit then you cannot withdraw funds there before the 3 month time is reached. There will be a sizable fine if you withdraw your deposit prematurely.
Withdrawal of deposits also cannot be done anywhere there is an ATM such as savings. Deposits can only be withdrawn from the Bank where you made the deposit. On the other hand, funds in savings can be withdrawn anytime and anywhere.
Some people take advantage of this difference to manage their personal finances. The trick is to separate funds for long-term needs with routine and emergency needs. Funds for long-term needs, if stored in the same savings account as funds for routine and emergency needs, will later be used to pay for temporary desires.
Therefore, after accumulating a certain amount in a savings account, they put it in deposits which are more difficult to withdraw. In addition to safe funds from yourself, you can also reap higher interest income.
Deposit Interest is Higher Than Savings
Banks usually charge higher interest rates for deposits than for savings. For example, when this article was written, the maximum savings interest at BCA was 2.05%, while the interest on Rupiah deposits with a 1-month tenor was 7.50%. If the interest on your savings is usually consumed by administrative costs, then with a deposit there is at least a small amount of profit left.
In Islamic banks, even the system of providing benefits for customers between deposits and savings is different. Savings accounts are usually Wadi’ah (deposit) themed, where the principle is that you ‘deposit’ a certain amount of money in the bank, and then the bank will give you a ‘bonus’ amount. In accordance with the principle of non-usury, this bonus is not a percentage like interest.
While deposits in Islamic banks with the theme of mudharabah (profit sharing), where you put funds in the bank to be channeled by the bank for financing (credit), the bank’s profits from the distribution will be distributed to you as a customer based on a certain proportion. Wadi’ah bonuses are usually much smaller than the share of mudharabah profits.
Deposits Are Investments, Savings Are Savings
Deposit interest which is higher than savings makes the nature of savings different from savings. Deposits are included in the class of investment instruments, as well as stocks, mutual funds, bonds, forex, property, gold, and so on.
Compared to the profit potential of other investment instruments, the profit potential of deposits is the lowest. However, the investment risk in the form of deposits is also the lowest. Therefore, investment deposits are very suitable for those who are new to investing and those who do not want to take high risks.
In addition, many also include deposits as a component of their investment portfolio while investing in other high-risk sectors.
On the other hand, keeping money in a savings account is not an investment act. Small savings account interest sometimes even makes your funds run out for a long time or decrease because it is used to pay administrative fees automatically. Savings accounts are suitable as regular deposits of incoming and outgoing funds as well as special situation reserves.