Saving is the cornerstone of financial planning for those looking to secure their financial future. Parking your saved funds in the right plans and accounts can help boost your corpus with compound interest earnings. You will come across an array of savings and investment options in India to grow your savings pool leveraging the benefits of high interest rates.
This blog helps you find some of the best money-saving plans in India.
Where to put your savings
When looking for places to save money and earn interest, consider two things: your savings goal and when you will need the money. For instance, if you are curating an emergency fund, parking the saved funds in a liquid investment makes sense since you would require easy access to them. Alternatively, if you are saving for a long-term goal, like procuring a down payment on a home loan or retirement planning, you can consider a less liquid, high-yield investment avenue.
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Best places to save money
Looking for some of the best money-saving plans in India? Here are a few popular, safe investment options you can consider to save and grow your idle funds:
1. High-yield savings account
If you are wondering how to get more interest in a savings account, simply switch to a high-yield savings account. While the interest rate for regular savings accounts varies from 2.70%-3%, high-yield accounts can offer rates as high as 4.50%. Compare rates online to find which bank gives the highest interest rate on savings accounts.
2. Public Provident Fund (PPF)
Often considered one of the best money-saving plans, PPF is a government-backed fixed-income scheme. You can start saving through PPF with a minimum contribution of Rs. 500 per annum. Interest rates on PPF investments are decided by the government but tend to be higher than the ones applicable to commercial savings accounts. As of 16th April 2024, the PPF interest rate stands at 7.10% p.a. PPF accounts come with a mandatory lock-in period of 15 years, during which the saved funds cannot be withdrawn. The sovereign guarantee on the scheme makes it a safe investment avenue for risk-averse investors.
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3. FDs and FD ladders
You can enhance the returns from your savings account with bank fixed deposits (FDs) that typically offer high interest earnings. FDs are some of the most popular and trusted investment avenues in India. Funds in an FD are locked in at a fixed interest rate for a predetermined tenure. As non-market-linked investments, FDs offer risk-free and guaranteed returns.
You can enhance your savings strategy with FD ladders, where multiple FD accounts are set up with staggered maturity dates. This approach helps ensure liquidity with regular income while allowing you to capitalise on varying interest rates over time. To earn higher returns on your saved corpus, create an FD ladder with high-interest-paying corporate FDs like the Bajaj Finance FD, which currently offers interest rates of up to 8.65% p.a.
4. Post Office Monthly Income Scheme (POMIS)
In addition to investing in the best interest-paying savings accounts, you can also consider allocating a portion of your savings to the Post Office Monthly Income Scheme (POMIS). Currently, POMIS investments earn an interest of 7.40% (as of 17th April 2024), which is payable monthly, ensuring a fixed stream of passive income for the investor. Both single and joint accounts (up to 3 members) are permitted under POMIS. Guardians can also open an account in the name of minors above the age of 10 years. POMIS accounts come with a 5-year investment term, with premature withdrawals permitted after one year. The minimum investment stands at Rs. 1,000, while the maximum investment caps at Rs. 4.5 lakh and Rs. 9 lakh on single and joint accounts, respectively.
5. National Savings Certificate (NSC)
NSC is yet another government-backed savings scheme that can be added to your fixed-income portfolio. National Saving Certificates can be purchased at banks and post offices with a minimum investment of Rs. 1,000. NSC interest rates are determined by the Ministry of Finance every quarter and currently stand at 7.7% (as of 17th April 2024). Your interest earnings are compounded annually but paid at maturity. NSCs come with a 5-year lock-in tenure and offer tax deductions of up to Rs. 1.5 lakh under section 80(C).
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6. Government bonds
Falling under the government securities (G-sec) category, government bonds are low-risk debt instruments that yield steady income until maturity. Backed by a sovereign guarantee, these bonds are auctioned to investors to raise capital for various government projects. Interest on the investment is payable on a set date based on the applicable coupon rate (interest rate) on the bond. There are various types of government bonds in India, including fixed rate, floating rate, sovereign gold, inflation-index, and zero coupon bonds. Depending on the type of bond in question, maturity dates may vary from one year to up to a few decades.
Bottom line
In conclusion, when it comes to selecting the best money-saving plans in India, you have several options to choose from. Instead of just looking for which bank gives the highest interest on a savings account, you can diversify your savings nest to earn more with compound interest benefits. From FDs to government bonds, you can craft a diversified portfolio to bring you the best blend of capital safety and high interest income. But remember to carefully consider options that best align with your financial goals and risk appetite.
