Keeping your money in a savings account and hoping for it to grow exponentially over the next few years is a myth that you should not be believing in 2023! If you want to see bountiful returns over your savings, read this article and take the next steps.
Since we were taught about finances, the importance of keeping money in savings accounts has been ingrained within us. Surely, it’s a great habit for beginners trying to save money, but if you want to grow your money, you shouldn't let your money idle in savings account.
Considering the inflation rate of around 6.7% in 2022, a savings account will only contribute about 3%. For example, if you have Rs. 1,00,000 in your savings account, it will be worth Rs. 94,000 next year. So, you are depleting your money and making a loss.
In a constantly rising inflated economy, you need to ensure that your money works for you, which is why the wise thing to do here is invest it.
When it comes to investing, your major concern should be to beat inflation.
As the average inflation rate every year is at 6%, any investment that gives you a return of 7% to 8% is good enough.
However, it entirely depends on your risk appetite where you want to invest - from stocks and cryptocurrency to NFTs or digital gold.
This article will highlight your money instead of just keeping it idle in your savings account.
But before we get into the various options you can decide on parking your money in, it’s important to understand certain aspects before you begin your investment journey.
Understand Your Immediate Needs
Sure investing money is a great habit, and everyone should do it but not without understanding your immediate needs.
By immediate needs, we mean educational expenses or getting health insurance, or maybe building an emergency fund.
If you have immediate needs, keep your money in your savings account for now.
Start Investments Slowly
As a beginner in the investment journey, it’s essential to start your investment journey slowly.
Considering you have little or no experience in investment right now, you will probably get intimidated or feel burned out after a while.
It’s more important to invest consistently than once and forget about it.
Go For Low-Risk Options- Especially in The Beginning
When you are just starting with taking out your savings and investing them, we suggest going for low-risk options.
No matter how many books you read and what popular influencers' you follow - you’ll never know what works for you unless you’ve tried it yourself.
Now, Let’s Look At 6 Popular Investment Options to Grow Your Savings!
1. Certificates of Deposit
If you’re not an avid money-spender and are comfortable locking a certain amount up for a year or two - then certificates of deposit are for you. The longer term you choose, the better interest rates you will enjoy.
However, the catch is that you cannot withdraw the amount before its maturity period - otherwise, you might be subject to penalties and extra charges.
We suggest calculating your expenses and planning your goals accordingly before you lock up your money for a certain period. Ensure that you don’t have any immediate costs, and if you’re confused, you can choose a shorter term of one or two years. Doing so will grow your money and give you flexibility alongside.
2. Liquid Funds
Backed by low-risk and complete flexibility, liquid funds are a go-to option if you don’t want to lock up your money and beat inflation.
The open-ended liquid fund schemes are perfect for short maturities and earn you an interest of 7% to 8% while remaining flexible to redeem the balance with a day’s notice.
Besides, keeping your emergency funds safe and growing steadily over time is a great option.
3. Money Market Accounts
Having a Money Market Account is just like having a savings account but with some added limitations.
Compared to Certificates of Deposit and Liquid Funds, the Money Market Accounts’ interest rates vary depending on the prevailing rate in the market.
However, your interest rate will also depend on meeting the minimum standards, such as maintaining a minimum balance and sticking to a limited number of monthly withdrawals.
4. Government Bonds
Government bonds are one of the safest options one can go for while investing their hard-earned savings.
The RBI issues these bonds through a non-competitive bidding facility where investors can participate in the auction and buy.
However, you have the option to invest in such bonds through mutual funds, or you can also invest directly through the government.
As these bonds come with a higher face value, you can invest through different brokerage firms according to your investment capacity.
5. Banking and PSUs Debt Mutual Fund
Unlike government bonds, the bonds issued by the banking and public sectors are also an excellent option for you no matter where you are on your investment journey.
Such an investment is ideal if you have a bigger investment horizon and long-term plans in investing.
Otherwise, liquid or short-term debt funds seem to be the perfect option if you have a short-term investment goal.
6. Short-Term Debt Funds
Short-term debt funds are your ideal go-to option if you have an investment goal for a month or two.
Though the risk exposure is a bit more than the liquid funds, the interest is good with no money lock-in commitments.
It’s a great option to park your emergency funds and make some extra bucks on it while still curtailing the risks.
It happens to be a great alternative compared to an RD or a savings bank account.
Before we wrap up
Now that you know, keeping your money idle in your savings account is like losing out on it without even spending it. Instead of letting inflation eat up your money, choose any of the low-risk options, invest it, and let it grow.
Now, as easy as it sounds - for someone just starting, getting out of the savings guilt and taking a risk to grow might seem too much. The convenient option here is to start small and slow to build up your consistency and make it a habit.
That’s the reason Jar is an ideal match for you. With Jar, you can start your investment journey from as low as Rs. 10, and guess what - it’s all automated. Once you have Jar up and running on your phone, it rounds your everyday spending by automatically deducting the amount and investing it in digital gold.
After all, doing nothing is better than doing something!