From the time we start earning, we are very much concerned about our future regarding the financial situations. This concern for a secured financial future increases the urge to multiply our income. One of the basic things we do to keep our money safe is by keeping it in the savings accounts. But if you think about it, how would idle money benefits you apart from its liquidated use?
Savings accounts can be used to accumulate funds if you are planning to buy things like electronic appliances or a vehicle, but using it as a long term investment will not gain you much benefits. If you are planning for a financially secured future, you can consider other investment options like Fixed Deposits or Mutual funds. It might be hard to make up your mind for investment while keeping your money safe in the savings account, as you can gain 6 percent on the amount deposited from a savings account too.
How to Invest?
A savings account is both common and essential in today’s time, so we know how and where to apply for it. To invest in liquid mutual funds, you can take the help of stock brokers and financial institutions who will provide you with necessary information and guidance for investment. Fixed Deposit accounts can be opened with the financial institutions, but you have to keep the interest rate in mind while investing.
Which is Better for Investment?
To clarify your mind about all the confusion before making any investment, you need to compare among the three sources i.e. savings account, fixed deposit and Liquid mutual fund. You can compare them on the following points:
- Liquidity: A person coming from a middle-class background might face many financial issues which would make him regret his investment. Hence, it is important that you choose an investment source according to your needs and financial investment. Savings accounts have better liquidity as it is fully disposable for the use of the account holder. The account holder can withdraw the money deposited according to his or her convenience with minor formalities and no extra charges. Liquid mutual funds have lower maturity period which makes it a favourable option for an investor to invest in it, which means in times of emergency the investor will be able to get funds easily with some profit added to the withdrawn amount. When liquidating mutual funds, you can get your invested money within two working days. On the other hand, it can be made useful if the investor chooses to invest in the non-cumulative FD Due to a minimum tenure of 1 year, it is advisable that you do not withdraw your money before the maturity period to avoid penalties and unnecessary charges.
- Returns: Investments can only be beneficial if the investor gains returns which would increase his accumulated wealth. The savings account offers 6 percent interest rate annually on the amount deposited in the banks. Mutual Fund returns are risky, and the return proportion can fluctuate due to the market conditions. When it comes to returns, fixed deposits can be one of the ideal forms of investment sources in the market. FDs are not affected by the changes in the market and give guaranteed returns. The returns on FDs are gained according to the interest rates applied on the Fixed Deposit.
- Investment security: It would be disheartening to lose your investment in the first try. Since Savings accounts can be beneficial only for wealth accumulation, it can be a safer option regarding investment security. According to investors mutual funds are one of fastest ways to multiply your wealth, but it is also risky for investment. Since Mutual fund investments are dependent on the market conditions for returns, any fluctuation in the market would make you lose your invested capital. For better returns and investment security, you can invest in fixed deposit. Fixed deposits investments are not exposed to any form of external Hence, the invested amount becomes the responsibility of the financial institutions. Hence, FDs provide better investment security.
A Savings account can be beneficial for wealth accumulation, but the benefit gained from the savings account might not make much of a difference. You need to consider other options like FDs and mutual funds for wealth multiplication.