11 places to put your savings!!

You’ve been preparing your budgets and capping your expenses.

You’ve been successfully evaluating the worthiness of a purchase before swiping your card.

You’ve also made your Personal Balance Sheet and have a clear picture of where you stand.

So, what’s next?

Now, you want to know, where do I put all the money that I have saved?

There are multiple factors that determine the choice of instruments you use from the plethora of options available.

The idea is to pick the ones where your money will make you more money.

How much money is subject to factors that are specific to an individual.

Two key questions that you must ask yourself before selecting your instrument are:

  1. What is the money for?
  2. When do I need that money?

Let’s explore the multiple options that are available to safely put your money in.

  1. Cash – Yes. That should be the first form of money that you must keep. Cash is the most liquid form of savings available. It is also the safest and easiest to access. Every individual must set aside a part of their savings in cash.

Did you know?

Holding a large sum of money in cash will eventually decline in value due to inflation. What this means is that what a rupee will buy you tomorrow will be less than what you can purchase with the same rupee today. Hence, it’s important not to keep a very large part of your savings as cash.

  1. Savings Account – Put aside money in a separate Savings bank account. Having more than one bank account has more benefits than is given its due. Keeping a Savings Account that is different from your main spending account results in higher chances of you actually saving that money. Different banks offer different interest rates and also have different initial deposit and minimum balance requirements. Spend some time researching about the options and choose the bank that meets your criteria of deposits, withdrawal and yet offers a good interest.

Did you know?

Interest earned on a Savings Account is tax-exempt up to Rs. 10,000 as per Section 80TTA of the Income Tax Act.

  1. Fixed Deposits – These are the good old, trusted by generations, safest form of investing your savings. A fixed deposit is a lump sum one-time investment that comes with a lock-in period and offers higher rates of interest when compared to a Savings Account. The defining criteria for an FD is that the money cannot be withdrawn before maturity. In case you wish to do the same, then you may only do so after paying a penalty. The lack of ease of withdrawal also aids in the savings remaining as savings and cuts down chances of using those funds for reckless spending.

Did you know?

Interest earned on a fixed deposit is added to your income and is taxed based on the tax bracket you fall into. Tax is Deducted at Source (TDS) if your interest income is more than Rs 10,000 in a financial year.

  1. Recurring Deposits – These are similar to FDs except that an individual invests a fixed sum monthly for a pre-defined period. They offer higher rates of return than a regular Savings Account. This is a more suitable product when a regular defined sum of money is available for investment rather than a lump sum value. One withdrawal is permitted before maturity for funds operational for at least 1 year and the amount is capped at 50% of the deposits in the account.

Did you know?

An RD Account, upto Rs.1.5 lakhs in the Post Office, falls under Tax Exemptions under Section 80C of the Income Tax Act.

  1. Public Provident Fund PPF is a debt instrument backed by the Government of India. It offers guaranteed risk-free returns. It has a relatively long tenure of 15 years but it also has a EEE status which means that the amount invested, the interest earned and the maturity amount received are all tax-free. Interest rates on PPF are reviewed quarterly by the government, with the current rate of interest being 7.1% compounded annually. A minimum of Rs. 500 needs to be invested annually to keep the account active with a maximum cap of Rs 1.5 lakhs.

Did you know?

Since the tenure of a PPF is 15 years, the impact of compounding of tax- free interest is huge, especially in the later years.  

  1. BondsA bond is a fixed-income debt instrument where an individual lends money to a borrower. The borrower pays a fixed rate of interest (called ‘coupon’) at pre-decided intervals and returns the principal on a designated maturity date. Corporates and the Government issue bonds to raise funds to finance their short-term as well as long term investments. It is vital to check the credit worthiness of the issuer before making an investment. Bonds are a good option for those seeking lower risk and steady flow of income.

Did you know?

The Central Bank, on July 1st, launched a Floating Rate Savings Bond, 2020 (Taxable) scheme with the interest reset every 6 months. The current rate of interest is 7.15% with a minimum investment of Rs. 1000 and a lock-in period of 7 years. Return from this investment is taxable based on the applicable tax bracket.

  1. Stocks or Direct Equity Investing in Direct Equity means buying the ownership of a company. This investment instrument is not for the faint-hearted. It is a volatile asset and there is no guarantee of returns. If the right stocks are not picked and/or the entry and exit is poorly timed, there is a high risk of losing considerable portion or all of the invested capital. Risk in equity can be reduced by opting for stocks across different sectors and market sizes of companies. Buying equity requires diligent understanding of the equity market and thorough insight of the underlying business of the company whose stock you wish to purchase. It also requires dedicated time and patience for regular tracking. However, over a long period of time, equities deliver higher inflation- adjusted returns compared to all other asset classes.

Did you know?

One can opt for the stop-loss method to curtail losses. In a stop loss, one places an advance order to sell a stock when it reaches the price defined by them.

  1. Mutual Funds A mutual fund is a pool of investment from multiple investors. The fund manager invests money across multiple assets such as equities, bonds, gold, etc. and charges a small fee for the same. A mutual fund is an ideal instrument for someone who lacks the time and/or knowledge to invest in Direct Equity. It is an investment in a diversified portfolio thus reducing risks and is professionally managed by an expert. Most mutual funds have no lock-in period, with the exception of an ELSS (Equity Linked Savings Scheme) where the minimum length of investment is 3 years. Another advantage of a mutual fund is that one can invest small amounts via a Systematic Investment Plan (SIP) with the frequency depending on the comfort of the investor.

Did you know?

ELSS is the only kind of mutual fund covered under section 80C of the Income Tax Act. An investor can claim tax deductions of up to Rs 1.5 lakhs a year by investing in ELSS. It offers the highest return among the 80C options with the lowest lock-in period.

  1. Government SchemesThe Government of India offers multiple investment schemes to support an individual financially. Some of the schemes are the NPS (National Pension Scheme), SCSS (Senior Citizens’ Savings Scheme), NSC (National Savings Certificate), APY (Atal Pension Yojana), PMJDY (Pradhan Mantri Jan Dhan Yojana), Kisan Vikas Patra, etc. The aim is to strengthen financial stability and offer attractive interest rates along with tax exemptions. These schemes support different classes of individuals and aid people across different strata achieve financial independence.

Did You Know?

Sukanya Samriddhi Yojana (SSY), is a saving scheme to secure the future of a girl child. The account can be opened until the girl turns 10 years old and is operative for 21 years from the date of opening. The minimum investment is Rs 250 while the upper limit of investment is Rs 1.5 lakhs. The maturity value of the scheme as well as any interest accrued on the investment is exempt from tax. At 8.5%, it offers the highest interest rate amongst the small savings schemes.

  1. Gold Investing in the yellow metal is a traditional form of investment in India. Investments can be made in both physical (jewellery, coins, bars) & non-physical (Gold Exchange Traded Funds or ETFs and Sovereign Gold Bonds) forms. Gold is seen as a good portfolio diversifier. It offers high liquidity and has inflation-beating capacity, making it one of the more preferred forms of investment.

Did You Know?

Sovereign Gold Bonds, issued by the Reserve Bank of India, are securities that are issued in denominations of one gram of gold. An investor gets the benefit of increase in price of gold along with a fixed rate of 2.5% of interest per year, which is paid semi-annually. The bond comes with a lock-in period of 8 years. It however, allows for an exit option after the fifth year from the date of issue. The interest on SGB is taxable, while the capital gains on redemption is exempt from tax.

  1. Real EstateIf a property is bought with an intention to rent it out or for sale to make profits, then it is considered as an investment. The location of the property is a primary factor in determining its price. Real Estate Investments give returns in the form of capital appreciation (increase in rate of the property) as well as rentals. It is, however, the most illiquid form of investment and may require multiple regulatory approvals.A very important question that one must ask before making this investment is whether one can afford it. The total costs involved could be much higher than what you might assume (stamp duty, registration charges, etc.).

Did You Know?

Legal Hurdles and Property Disputes are extremely common in India. Hence, before jumping the gun and investing in a property, it is highly advisable to ensure that the property is free of hassles.

A little research can go a long way in determining which instrument will work the hardest for you. While investments come with risks, investing consistently and spreading your money in the appropriate percentages across diverse asset classes can help maximize your gains and limit your losses. Picking the right options that work towards achieving your financial goals will ensure peace of mind.

So, let your money make money for you while you sleep.


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