Don't Waste Money in Savings Bank Account

Are you keeping excess money in savings bank for one of the following reason.

Ø  I am waiting for a good opportunity to invest.

Ø  I am receiving interest on this money without any risk.

Ø  I can withdraw money anytime for emergencies.

Ø  I am just comfortable with money in my bank instead of other avenues.

Well you are part of the majority of people in India, who keep the money in Savings bank account as other options are not known to everybody. You should know other options also which can be utilized for parking the money while you take the decision about the final investment.

I am showing below some of the options & their comparison chart

o    Savings Bank Account: Keep the money lying in bank account

o    Fixed Deposit : Simple Fixed Deposit for a fixed tenures

o    Liquid Mutual Funds : These are Debt Mutual Funds which give us benefit of anytime withdrawals

o    Ultra Liquid Mutual Funds : These Debt Mutual Funds are one step above Liquid Funds which provide better returns with same conditions as Liquid Mutual Funds

o    FMP Plans : Fixed maturity plans. These are special schemes by Mutual Funds which are for predefined duration & Money is invested for Fixed period ranging from 45 days to 3 years.

All the above are options for short term & safe investment where your capital is protected, given below is the chart of possible returns from these instruments with the pros & cons.

Type of Investment	Savings Bank Account	Fixed Deposit	Liquid Mutual Funds-Dividend Option	Ultra Liquid Mutual Funds -Dividend Option	FMPs-Dividend Option
Returns	4.00%	9.25%			8.50%
Post tax returns	2.80%	6.48%	6.75%	8.00%	8.50%
Tax Rate	30.00%	30.00%	0%	0%	0.00%
Type Of Income	Other Income	Other Income	Exempt income-Dividend	Exempt income-Dividend	Exempt Income-Dividend
Compunding frequency	No Compounding	Quarterly	Daily	Daily	No Compounding
Positives	1. Anytime Money Availability	1. Easy to operate 2.Income tax is applicable hence proper reporting necessary	1.can be withdrawn within 1 day without any loss of money 2.No Taxation	1.can be withdrawn within 7 days without any loss of money 2.No Taxation	Best Returns
Negatives	1. Low Interest	1. T.D.S. 2.Heavy Penalty for premature withdrawal.	1.can not be withdrawn on weekends	1.can not be withdrawn on weekends	1.Can not be withdrawn before maturity 2.No visibility on end usage of funds

The unforeseen benefit of not Keeping the money in Savings bank Account is that the Telephonic calls from The bank asking to check with you for Personal Loans & credit Cards stop as they have no data about how much money you have.

Other Articles

Types Of Mutual Funds

Taxation of Mutual Funds