Why Should not You keep All Your Money in Banks Savings Account
By Anupama Deshpande | October 8, 2017

Now-a-days as salaried persons get their salary directly credited to their salary account which is a savings bank account, let their money lying in the same account and do not bother whether it is a good thing. Do you also keep all your money in savings account of your bank? Actually, the savings account is not meant for keeping your majority of funds, just because it is very convenient & very liquid.

Bank's savings account is a good place for keeping your emergency fund as it is most liquid means whenever you require, you can withdraw the amount from your savings account.

Emergency fund here can roughly be calculated as monthly living expenses for 6 months. For example, if your monthly expenses are Rs. 15,000 then your emergency fund would be Rs. 90,000. It varies from person to person and also dependent on one's financial situation.

Although Savings account provides you a ready access to your funds but still it is not suggestible to hold all your funds in it. There are many other available options which are liquid too and beneficial as well.

Keeping major portion of your money in the savings bank account is not advisable for the following reasons:

• Big amount of money in the bank encourages unnecessary or not-so-urgent spending
• Banks offer very low interest rates on balances kept in savings accounts
• It doesn't offer any tax relief
• It will not help your achieving your long term goals

Yes, this is the natural question which rises in one's mind. One must be aware that there are many options available to park your rest of the money where you will earn more and they also offer you liquidity.

Listed below are the other alternatives available to keep your funds:

1. To park your money for less than 1 year
   • Short Term Fixed Deposit: You can keep your money in it as it offers much more interest than savings account.
   • Liquid Mutual Fund: It is very liquid & offers almost double of savings account returns. Now-a-days, some of liquid mutual funds provide you a card, just like a debit card, through which you can withdraw amount from any ATM 24X7.
   • Ultra Short Term Mutual Fund: It offers you much better return than savings account with liquidity facility. It is also a scheme of mutual fund.


2. To park your money for more than 1 year
   • Bank Fixed Deposit: Bank FDs for 1 year and more offer better returns. You can anytime withdraw the funds also after paying a small penalty.
   • Debt Mutual Fund: It is a scheme of mutual fund which is safe & offers you more returns than Savings Account of a bank.
   • Equity Mutual Fund: If you are ready to assume some risk, you must put some of your funds in it. It provides very good returns, if invested the money for a long term. It helps you achieving your long term goals as well.
   • Hybrid Mutual Fund: It is a mix of debt & equity. It is less risky than pure equity mutual fund scheme. It generates much higher returns than a simple savings account of your bank.

It used to be said "Save for future" but now-a-days, it is changed to "Invest for future". I am sure that this blog will help you parking your money, other than your emergency fund, with other better avenues so that you can raise your amount over a period of time.