Best avenues for recent times

There is a saying that “Certain things need to be in certain place in order to maintain safety & value”. Money is also needs to be kept in particular place in order to protect its value. But, many of us are having huge sum of money lying idle in a Saving Bank Account, where we get meagre interest rate of 3.5%P.A. But the current Inflation rate ranges between 8 to 8.30%, which is far ahead of what we are getting from saving bank Accounts. This will eat out our capital & make our money’s value less.

Many people think that parking one’s hard money in Saving Bank accounts is the only safest option available in India. But, in reality, there are numerous opportunities/avenues available to park your money which provides much required safety & at the same time also provide high returns at least as compared to normal Savings Account. Here, I am going to discuss about two avenues, namely Auto-Sweep & Fixed Deposits:

Auto-Sweep

One of the best avenues to park our money can be, by availing Auto Sweep Facility. This facility offers you high interest rate & offer liquidity like Saving Account.

It’s a combination of a regular Savings Bank Account with the high Yield of Fixed Deposit.

Here, an amount in excess of predetermined amount is automatically transferred to a Fixed Deposit.  Thus, you can earn a high interest rate on such amounts. This Process is called Sweep In.

When you need more money and want to withdraw, such Fixed Deposits are automatically broken and you can withdraw just like normal Savings Bank Account. This process is called Sweep Out.

Since Deposit are broken down in units of Rs.1/-, you will lose interest only for the actual amount that has been withdrawn. Amount & Tenure for Auto Sweep Facility available for various time periods, hence, one can choose according their needs & convenience.

These types of facilities provide interest rates up to 6% to 7 %( in current scenario), which is double than Savings Account.

This may not able to beat Inflation, but is better than 3.5% you can get from normal Savings Account.

Most of the banks in India provide this Auto-Sweep facility, for details contact your respective Bank.

Ideally, one need to park at least 3 months of one’s expenditure as a contingency/emergency fund in Savings Account, in order to meet unfortunate emergencies or job loss. But, few people may think, that why do we needs to park, so much money in an instrument which pays interest of only 3.5% p.a? For these kind of people, Auto-Sweep Facility will do wonder.

Bank Fixed Deposit

Bank Fixed Deposit is considered one of the best & safest products available in our country. At present scenario, banks offer Interest rates from 8.5 to 9.5%. For Senior Citizens, some banks even offer interest rates up to 10.0%. So, for people, who are having cash in their Savings Account, more than three months expense can opt to invest in safe haven-Bank Fixed Deposits, to benefit from attractive interest rates. In fact, a person who comes under the 10% tax slab can consider investing in fixed deposits, which offer returns up to 9.5%p.a, which means tax adjusted return of 8.5%.That, is the return offered by PPF (when one keep on remaining invested for 15 years).Hence, people who comes under the 10% bracket may even consider diverting some percentage of money which is supposed to be invested in PPF towards Fixed Deposit in order to avail benefit from rising interest rate.

Last, but not the least, having more money in Savings Account idle, will make your hard-earned money succumb to Inflation pressures. So, try above avenues & use rising interest rates to your advantage.