Don't stash your cash: Save money by balancing savings and investing

Did you know that the average Indian parks approximately Rs 30,000 in their savings account at any given time, according to data from the Reserve Bank of India? While it is imperative to save money, you should also understand how the amount you keep in your savings account impacts your personal financial goals, future planning, and overall financial well-being. 

Let's understand how you can make informed decisions to save money.

How much money can be deposited in a savings account?
 

Unsure about the amount you should keep in your savings account? While there is a minimum average balance, there is no savings limit or maximum amount you need to maintain.

That said, having multiple accounts for different purposes is a savvy financial move. By dividing your funds into different accounts for your specific objectives, you can optimise your savings as well as investments. Here's how you can open separate accounts for various purposes - 

• Emergency funds
  
  As a general rule of thumb, maintaining an emergency fund equal to living expenses of at least 6 months into liquid assets in your savings account is the most preferred. Now you have a safety net in case of unexpected circumstances, like  the loss of your job or medical emergencies.

Also read - Benefits of having more than one Savings Account

• Regular expenses
  
  It's wise to keep a buffer amount in your primary savings account to cover regular expenses and avoid overdraft fees or liquidity issues. It should be sufficient to cover your monthly bills and daily expenses.
• Investment opportunities
  
  Once you have established your emergency fund, explore other investment options to make your money work harder for you.
  
  IDFC FIRST Bank provides various investment products, including fixed deposits (FDs), recurring deposits (RDs), etc. to help you diversify your savings and investments. Doing this will offer higher returns compared to a savings account alone, allowing you to save money over time.

• Savings for goals
  
  Consider setting up separate savings accounts for specific goals, such as purchasing a house, funding education, or retirement planning. By allocating funds to different accounts, you can better track your progress toward each goal and allocate investments accordingly.
  
  By maintaining multiple accounts, you gain better control over your finances, streamline your savings strategy, and maximise the growth potential of your money.​

Will you even benefit from it, given the multiple investment options?
 

Savings accounts are a secure option to store and save money as they steadily grow your wealth.

In addition to a savings account, various investment options can help you save money, such as -

• Fixed deposits (FDs) or recurring deposits (RDs)
  
  FDs are popular due to their low risk and guaranteed returns. IDFC FIRST Bank offers competitive interest rates on fixed deposits, starting from 3.5% p.a. to 8.00% p.a. for a tenure of 7 days to 10 years. With the IDFC FIRST Bank Recurring Deposit, you can earn interest up to 7.75% p.a. with a minimum instalment starting at Rs 100.
• Mutual funds
  
  Mutual funds offer higher returns as compared to traditional savings accounts. There are numerous mutual fund options across various asset classes. You can choose funds that align with your risk appetite and investment goals.
• Equity stock investments
  
  Investing in stocks can offer significant long-term growth potential. You can consider investing in equities if you are comfortable with market fluctuations and have a high-risk tolerance.
• Bonds
  
  Bonds are fixed-income securities that pay periodic interest to investors. They are considered relatively safer than stocks and offer a steady income stream. Various bond options, including government and corporate bonds, can provide stable returns and diversify your investment portfolio.
  
  Assess your risk tolerance to determine how much of your savings you are comfortable allocating to different investment options. And if you are risk-tolerant with a long-term investment horizon, you can consider higher-yielding options to invest and save money.

Also read - What are Bonds?

Benefits of compounding
 

Even though there are other opportunities to generate higher returns, you can benefit from maintaining a savings balance through the power of compounding. Compounding refers to earning interest not only on your initial deposit but also on the interest that accumulates over time.

Banks often provide quarterly or monthly compounding. To illustrate, IDFC FIRST Bank offers monthly interest credit up to 7% p.a. and, hence, you enjoy monthly interest compounding at attractive rates.

Why IDFC FIRST Bank?
 

IDFC FIRST Bank understands the importance of providing a comprehensive suite of banking services to meet the diverse needs of its customers. You can enjoy the following benefits -

• High-interest savings account - With IDFC FIRST Bank, you can earn high-interest savings with their competitive interest rates of up to 7% p.a. ensuring that your savings grow accelerated.
• Monthly interest credit on a savings account - IDFC FIRST Bank offers monthly interest credit on savings account. This means the bank credits the interest earned monthly, allowing you to enjoy the monthly benefit of compounding. 
• Zero Fee Banking* - With IDFC FIRST Bank, you do not need to pay banking charges on 28 commonly-used savings account services. Some of these include charges for chequebook re-issue, SMS alerts, cheque return, issuance, renewal, or replacement of debit cards, ATM transactions, and much more.

Also read - All you need to know about simple and compound interest

Wrapping up
 

IDFC FIRST Bank understands the importance of both saving and investing. With the IDFC FIRST Bank Savings Account, you get competitive interest rates, ensuring your money grows steadily. Click to open a savings account right now.

Disclaimer

IDFC FIRST Bank offers Zero Fee Banking on Rs. 10,000 Average Monthly Balance (AMB) Savings Account and higher account variants, subject to maintenance of AMB in the account.

These services are being offered free in good faith, and in case of abuse, the bank reserves the right to charge fees as per market norms. All rights reserved.

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.