It is quite obvious to stay uninformed about the need to save money for your future adventures in your 20s. As a graduate, fresh out of college, when you start earning, you begin to taste the freedom of being financially independent. You are less likely to save!
Let’s understand why is it critical to have your stash money ready at your rescue and how you can start saving up for it with minimum effort?
After a quick conversation with Milo, a 24-year-old independent man, who loves to travel and is currently contemplating his first international trip to Europe, we came to know that he has not saved up enough money to sponsor his trip.
As millennials, you want to stay on top of your bucket list and make sure you tick off one after the other. To turn every dream into reality, you will want to have a financial backup fund to support it! Everything comes down to investing a portion of your salary every month, allowing time to work its magic (interest returns), and later avail sumptuous wealth benefits after a period of time.
Let’s find a solution to how Milo can effectively plan and manage his money so he can sponsor his trip to Europe 3 years from now!
There are various Risk-free investment plans that offer moderate to great returns over a period of time.
- Fixed Deposit (FD)
- Recurring Deposit (RD)
- Mutual Funds.
- Savings Account.
Fixed Deposit (FD)
Fixed Deposit, also known as “term deposits” or “time deposits”, is one of the reliable, secured, and stable options for investing money. You are not exposed to any risks that can work against you. It offers an interest rate of 7% to 8% (by various banks and NBFCs) depending on the bank. Return rates are generally higher than savings accounts. Investment tenure is between 7 days to 10 years. To deposit in FDs, you need to have a lump sum to start with. Premature withdrawal or closing of an account before the maturity period attracts a penalty charge from the bank.
Recurring Deposit (RD)
With other plans offering risk-free, assured returns on the invested capital, Recurring Deposit is one of them. When you do not have a lump sum to invest, you can invest a relatively smaller amount every month from your salary to meet your short-term goals.
It offers an interest rate of 5% to 8% depending on the bank. Investment tenure is between 6 months to 10 years. The minimum investment in an RD is as low as Rs 10. Premature withdrawal or closing of an account before the maturity period attracts a nominal penalty charge from the bank.
Mutual Funds
For millennials, investing in mutual funds is the best way to grow money in multi-folds.
There are different types of plans in Mutual Funds that allow investing a small amount on fixed intervals, Systematic Investment Plan (SIP) is the effective method of investing in Mutual Funds.
Through SIPs, you can start with an amount that is as low as Rs 500 per month. Allow a minimum of 3 years of time to avail lucrative returns through the “magic of compounding”.
Did you know? Under Section 80C of the Income Tax Act — 1961, you can also save tax up to Rs 1,50,000 per annum by investing in the Equity Linked Saving Scheme (ELSS) of mutual funds.
Savings Accounts
A savings account acts as an interest-bearing deposit account that is safe and reliable for short-term, long-term goals, and emergency funds. By investing in savings accounts, you can make transactions anytime, anywhere which is called Liquidity. Banks offer a relatively moderate interest rate to people investing in savings accounts.
Did you know? Under Section 80TTA, interest amount earned beyond Rs 10,000 is taxable.
We have now covered different types of risk-free investing options, offering moderate to high return rates that Milo can choose to invest in. Milo will be able to generate wealth by earning from his own money (relishing the magic of compounding) over a period of 3 years. He can use that money to fulfill his dream of traveling to Europe!
Still confused on where to start? Let us help you.
We, at www.getoapp.com, are associated with top-notch finance experts who have been in the finance market for more than 15 years. We have great strategies to share on effective ways to manage your money, with beginners like you!
Come say hello in your own language, we are always at connect@getoapp.com.
