You save your hard-earned money in a bank account simply because it is a secure way of savings. You are well aware of the fact that returns in the form of interest rates on savings account hover generally in the range of 4-6%. The fact you need to understand here is whether you are getting optimal returns for your money parked in a savings bank account.
Let us assume your year-end savings, which you have accumulated in your bank account is Rs.100,000. Therefore, the accumulated interest would roughly be somewhere in the range of Rs.4000-6000 p.a. depending on the interest rate your bank offers. Do these returns justify your principal savings? Could you have earned more cumulative returns by spreading these savings in different asset classes based on a proper financial plan? Given the wide variety of investment options these days, you are absolutely right if you feel your savings have yielded below par returns.
Therefore, it is time for you to start planning your finances properly and go in for a diversified investment strategy. Having a cash cushion of three to four months of your salary in your savings account is critical. However, there are ways to ensure that you are maximising your bank accounts in terms of optimal efficiency of interest received on that money.
Here are 3 simple tips to make efficient use of your bank money:
Be clear about the type of fees you pay in your bank account
It is very important for you to know all types of fees that you pay to maintain your savings account with your bank. Simply call your bank’s customer care and ask them about your monthly maintenance fees, annual fees, transaction fees, ATM transaction charges, and other applicable fees. These fees possess the capability of diluting your savings appreciably over time. Therefore, know it before you lose it. There could be charges that you may not want to incur, which you could do away with. It is vital for you to find ways to eliminate them or negotiate them with the bank’s representatives. In some cases, you would just have to maintain a minimum balance by making intelligent decisions regarding money transfers. When you are aware of these things, just do them effectively on time to save unwanted charges.
Know the interest you are receiving on your savings bank account
Once you have worked out the fees you pay, next thing you need to know is the interest you receive for keeping your money in your savings account. If you are not at all happy with the interest you are receiving, Google up on interest rates offered by different Indian banks or simply call your financial planner and ask them. If you feel you are not getting enough returns on your savings account, it is time for you start thinking of diversified investment options to maximise your returns.
Divide your cash into 2 simple buckets for optimal returns
Divide your month-end savings into two easy buckets. For instance, let’s assume you draw a salary of Rs. 40,000 per month. If you save Rs.10,000 by month end, leave Rs.5000 in your savings account and start a mutual fund SIP of Rs5000 with the remaining savings. This will help you accumulate Rs.60,000 by the year end in the savings account, which is a cushion of 1.5 months of your salary with returns in the range of Rs. 2000-3000 p.a. This will keep improving with time. Moreover, the returns on your monthly SIP of Rs.5000 @ 10-12% p.a. come in the range of Rs. 6000-7000. These returns will take shape of a commendable amount if you stay invested with a long-term horizon. Now, your cumulative year-end returns with this new strategy would be around Rs.10000. If you would have left Rs.10000 monthly savings idle in your bank account you would just have got around Rs.5000-6000. This bucketing strategy would help you almost double your returns with the same amount available at your disposal.
You must remember the golden rule – ‘More the savings, more your chances of diversification, more the returns.’ Therefore, don’t let all your money lie idle in your savings account, just plan investing it in different asset classes.
To know more about financial planning and diversifying your investments by starting mutual fund SIP, give a missed call at 08010968308
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