Savings Account: Middle-class individuals shouldn’t keep their entire savings solely in a savings account, as the low interest rates don’t keep pace with inflation. CAs recommend keeping some of the money in savings and dividing the rest among investment options like fixed deposits, PPF, and SIPs.
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Middle-class families in India often consider a savings account the easiest option for keeping their hard-earned money safe. But is it the right place to keep all your money? A chartered accountant (CA) explained in detail that while keeping money in a savings account is safe, it’s not always the best option.
The biggest advantage of a savings account is liquidity, meaning the ability to withdraw funds immediately when needed. This facility is extremely useful in times of medical emergencies, children’s education, or unexpected expenses. Additionally, the interest rate offered by the bank (typically 3-4%) provides a small income. However, the problem is that this low interest rate doesn’t keep pace with inflation. This means that over time, money kept in a savings account begins to lose its real value.
According to CAs, middle-class people should divide their savings among different investment options. For example:
– Fixed Deposit (FD): A safe and fixed interest rate option.
– Recurring Deposit (RD): Good for regular savers.
– Mutual Funds and SIPs: These offer better returns in the long term.
– Public Provident Fund (PPF): It is an excellent means of tax saving and safe investment.
Insurance and emergency funds: Essential to deal with unexpected situations.
Middle-class families often prioritize security and convenience. They fear losing money in investments or risking losses. However, experts say that keeping all your money solely in a savings account can be a financial loss in the long run.
The CA advised that everyone should create a financial plan based on their income and expenses. It’s wise to keep some money in a savings account for essential expenses and emergencies, but the remaining funds should be invested wisely in various investment instruments. This not only protects savings but also provides better returns for the future.
