An old adage that everyone would have heard, we even keep repeating this to our children. But do we implement it in our day to day life? No.
A simple case in point is the cash in your savings account. We get our salaries by the end of the month or the first week of the month, our EMIS and SIPS get deducted as per the schedule. And then the rest of the money remains in our account. Do you know the money in the savings account fetches around 3%. Any bank offering more than this would want you to have a higher balance in the account. That’s cash lying idle in your savings account, enticing you to spend it. And that gets added every month, by the end of a few months, you are sitting on a substantial idle amount. You may think it’s too small an amount to invest or what difference it makes. Guess what, every drop counts. You may consider putting it in Fixed Deposit, not a bad option, but it’s not the only option now.
You now have another option and that is liquid fund plan. Liquid funds are a type of debt mutual funds which primarily invest in money market securities for very short period of time As the name suggests, these funds have high liquidity and the returns are less fluctuating since these funds invest in securities which are maturing in very short-term. . It’s the lowest on the riskometer and least volatile, hence considered safe. There is no lock-in period as well, so you can withdraw without losing any interest on your invested amount.
With a Liquid Fund plan, you have a great solution. You have the ability to obtain a great return on investment, and also have the option to be extremely liquid, that is, have your money any time you wish. Investing in a liquid fund is a much sensible option since it has everything one could ask for, with your money being safe.
On an average, Liquid Fund fetches you on average a return of around 7% versus 3-4% in savings account. Furthermore, with digital and online facilities, the process to purchase and redeem from the fund is very simple. You receive the funds within 24 hours, some of the mutual fund companies have the facility to make the funds available to you within hours if required.
I recommend that one should keep 2 month’s expenses in the savings bank account, and 3-6 months’ regular expenses in a liquid mutual fund.
Most importantly, it also keeps the money safe from impulsive spending unlike savings in bank accounts.