Why Your Savings Account Might Not Be Enough
3/30/20243 min read
Why Your Savings Account Might Not Be Enough
In today's world, where inflation is high, simply keeping your money in a savings account might not be enough to secure your financial future. While it may feel safe to have your funds readily available, the reality is that the value of your money is depreciating over time.
The Problem with Savings Account Interest Rates
In India, savings accounts typically offer an interest rate of around 3 to 3.5%. Unfortunately, this rate of return is not enough to keep up with inflation. In fact, it can result in a negative return, meaning you are effectively losing money by keeping it in a savings account.
Consider Fixed Deposits for a Safer Option
If you want to avoid earning a negative return on your savings, it is advisable to consider investing in fixed deposits. While fixed deposits may not actively grow your wealth, they offer a safer alternative to savings accounts.
Fixed deposits provide a higher interest rate compared to savings accounts, typically ranging from 5 to 7%. While this may still not beat inflation entirely, it at least ensures that your money retains its value and does not depreciate over time.
Furthermore, fixed deposits come with the added benefit of being a secure investment. Your principal amount remains intact, and you can choose the duration of the deposit based on your financial goals and requirements.
By opting for fixed deposits, you can protect your savings from the erosive effects of inflation and ensure that your hard-earned money remains safe and secure.
Since you understand the importance of creating FD it is also important to know in which bank you can open the FD. Your obvious inclination is towards Public Sector Bank as we understand these are government owned banks. But please understand after all these are PSU banks and while providing service to customers they cannot compete with private banks. There are certain private banks they are not only good service provider but also use new edge technology where you can open saving accounts and fixed deposit sitting at home and no need to even visit bank to complete all such account opening formalities.
Please note be it any bank your deposits are insured by Deposit Insurance and Credit Guarantee Corporation (DICGC) up to Rs. 5 Lakhs per bank and that is too if you have opened FD in different capacity like individual account or joint account with spouse or joint account with children or joint account with parents. All such FDs are separately covered up to Rs. 5 Lakhs. e.g. if one person opens Rs. 5 lakh FD each with let's say 4 such combination of capacity with 3 different banks then he is covered with insurance of Rs. 5 lakhs*4*3 = 60 Lakhs. Hence it does not matter if its private bank or public bank your deposits are safe due to insurance coverage. So, it is important to select good service provider bank to save your time and money both.
Below are few reputed private banks which can be explore to open saving account and place fixed deposit with them.
Kotak Mahindra Bank: No need to step out of your house to complete your KYC. You can open a account and complete KYC on a video call. Click here to understand more details about this bank. https://inr.deals/GUz7oK
AU Small Finance Bank: You can enjoy High interest rate of up to 7% p.a. on your saving account with monthly interest payout. Check out more details on this link. https://inr.deals/xPG7jV
Indusind Bank: IndusInd Bank is a universal Bank with a widespread banking footprint with over 2.5 crore customers, over 5000 distribution points and nearly 2000 branches across the country. Check more information on this link. https://inr.deals/a9ZM1v
Exploring Other Investment Opportunities
While fixed deposits offer a safer option compared to savings accounts, it is important to consider other investment opportunities as well. Depending on your risk appetite and financial goals, you may want to explore options such as mutual funds, stocks, or real estate.
Mutual funds, for example, provide the potential for higher returns by investing in a diversified portfolio of stocks and bonds. However, it is crucial to conduct thorough research and seek professional advice before venturing into these investments.
Ultimately, the key to making your savings work for you and growing your wealth lies in diversifying your investments and staying informed about the various opportunities available.
In conclusion, relying solely on a savings account may not be enough to combat the effects of inflation. By considering alternatives like fixed deposits and exploring other investment opportunities, you can ensure that your money is working for you and safeguard your financial future.