Hello Readers! 

Many of us have a habit of keeping money in a savings bank account. Maybe behind this, the reason is the bank offering 3-4 % annual returns. But during this period when the GDP is low and the interest rates are trending low, it is a good habit to keep our money idle in our bank account.

A major public sector bank now pays 2.75% a year on money lying in your savings bank account; till last year they were paying 4% a year. If you were to open a fixed deposit with them, you would earn 4.4% a year on which you’ll pay some tax. Well, this is the reality of bank offering returns on the money stored in your saving account in the low-interest rate regime.

The easily accessible money in your savings bank account makes you feel that your money is safe and secure at a place, but in reality, this is a false feeling. It is true that you need money for your future financial goals, but that if you save money and make it sleep in your saving bank account then let me aware you, that you are actually depleting the value of your money. I say deplete because, at close to 6% inflation or price rise in the economy, it’s clear that if you let your money sleep off in the bank, its real value is falling not growing.

Now the question is how can you avoid this? What smart steps you should make to make your money grow with time? Here I suggest choosing smarter investing options.

Liquid Funds For Short-Term Needs

You can have money equal to 3-6 months’ worth of expenses, in your bank account only if you feel that you might not end up spending this on unnecessary things. But if it is not the case then I advise keeping money equal to 2-month expense in your bank account and the rest you must shift to liquid funds. Do not worry your money is safe in liquid funds too.

Liquid funds are the lowest risk mutual funds where you can park money, earn a slightly better return than a savings bank account will give you, and also withdraw at a day’s notice. This is taken as the best alternative to the savings bank account.

Start regular Long-Term Investing

You will know that the money that you have kept in your bank account is not going to be utilized completely by you in the next 3-6 months or even the next 1-3 years. There is a portion of this money that you won't be using in the long-term in fact you might be saving this for your future goals, say retirement or your child's education, but a savings bank account is really not that place where you should be saving this amount.

First try to ascertain what this amount is, which, you don’t need in the foreseeable future. Then break it up into smaller figures and invest every month in an investment option that can help you create long term wealth.

Here as per experts advice, the best way is to start a SIP in equity mutual funds for the long-term. This will help you utilize those excess funds lying in the bank judiciously towards long term wealth creation.

You need to understand the mechanism for wealth creation used by the equity mutual funds. The more continued you are with your investment and the longer you carry it out, the more your investment will help you create wealth. If you invest regularly for two or three years and then tempt to withdraw all your investment, then this strategy won’t help you create good wealth.

Basically, there are many more ways where you can invest your money and make it grow, instead of keeping it idle in your bank account. Here what you need to analyze is your goals or objectives, and how much corpus you have to build to achieve them.

Understand that what you have kept in your bank account is your hard-earned money, don’t just let the inflation eat into the value of your money. So, don’t keep your money at a place where it doesn’t belong, invest it at a place where it can grow and bring that smile of satisfaction on your face.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee of future returns).