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Maximizing Savings

by Sameer Kaila

If you have more than what you need lying idle in your Saving or Current Account then you are missing on maximizing savings that can give you big rewards..

How much interest do you get in your Current Account? Your Answer is NIL…Yes, you are absolutely right!

How much interest do you get in your Savings Account?  Yes, you will get between 2.7% to 3.5% per annum in most of the nationalized banks and top private sector banks.

Let’s first understand the Pros and Cons of keeping funds in savings or current account

Pros :

Emergency Fund Withdrawal  

Funds in Savings or current account are biggest shield against any emergency, which can occur anytime. They can be withdrawn instantly.

Anytime Liquidity

Funds in savings account provide 24*7*365 liquidity which can be used anytime.

Convenient Fund Transfer  

Funds lying in Saving or Current account can be immediately transferred to any other account via IMPS, NEFT , RTGS or UPI, through internet banking and mobile banking.

Cons :

Low Interest Rate

Nil interest rate in Current Account and very low in Savings account.

Rise in Expense

Easily access to funds lying in saving or current account through debit cards are more susceptible to be spent.  Impulsive buying is more prevalent when there are excess funds that are easily accessible.

How Much Fund Should Be Ideally Kept in Savings or Current Account?

Ideally amount equivalent to one month of expenses should be kept in Savings or Current account.

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Can I Get Better Returns on My Funds Lying in Savings or Current Account? What are the ways of maximizing savings?

Yes, you can. The rest of the excess amount can be bifurcated as:

1. Funds Less than 3 Months:  (No Lockin)

These funds can be invested in Debt Funds like liquid funds or money market funds which can provide return between 5% – 5.5% per annum. These funds can be redeemed within 24 working hours.

2. Funds Between 3 to 6 months of Time Duration:

These funds can be invested in FDs (With Lockin period), Debt Funds like Ultrashort term funds / Savings Fund/ P2P Lending Schemes (No Lockin). The Returns will range 5.5% to 6% per annum in Mutual Funds as per the current trend. These funds are liquid and can be redeemed within 24 working hours.

3. Funds 6 months – 1 year:

The fund can be invested in FDs, Debt Funds like Low Duration, P2P Lending Schemes. The Expected returns will be 5.5% to 6.25% as per the current trend. These funds are liquid can be redeemed within 24 working hours.

If you are not sure that when there will be requirement of funds, you can park the fund in overnight funds/ liquid funds. This will help you earn 500% to 600% more returns for the funds lying in Current account and 100% more than that in savings account.

If by any chance you have Rs. 5 Lakhs lying in your savings account for last 5 years, just see how equity fund can help in maximizing savings:

Investment Amount Returns Current Value after 5 Years
Rs.5,00,000/- Savings @ 3% p a Rs.5,80,000/-
Rs.5,00,000/- If Invested in Equity Funds @ 15% p a Rs.10,44,000/-

For maximizing savings, keep a check on your Savings and Current Bank account and make wise choice whenever there are excess funds.

Disclaimer: Mutual Fund Investments are subject to market risk. Please consult your Financial Advisor/ Mutual Fund Distributor before investing.

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