Banking

Saving Money the Traditional Way

Women's empowerment - a lot of it is about money. Women have been discarding their limited traditional role of tending the home fires, to come out and work shoulder to shoulder with men for quite some time now, but it is only of late that they are getting to play a part in deciding what to do with the money earned. Finance has traditionally been a man's province and women have long considered it unfeminine to be knowledgeable about money matters. Thankfully, the mindset is changing and more and more women, faced with the responsibility of handling finances, are trying to come to grips with various types of investment and savings avenues.

Saving and investment opportunities can be broadly classified under the heads of Banks, Non-banking Finance Companies (NBFCs) and Company Deposits. Several of these offer multi-dimensional avenues. Each has to be considered in terms of Risk, Returns and Liquidity, and any financial decision has to be taken with these golden principles in mind.

Banks represent the least risk as savings avenues. But they also offer the least returns. Liquidity is also not particularly high. With liberalisation of the Indian economy has come competition, which in turn has ushered in some innovative and attractive savings schemes from banks, both Indian and foreign. All banks offer savings bank (SB) and current account services. The former is aimed chiefly at individuals, non-trading organisations and institutions, the purpose being to meet all banking transaction needs as well as offer a means of saving. The philosophy is 'Save while you can, Draw if you must', as one bank puts it. Current Accounts cater to businessmen, corporate bodies and institutions which operate their accounts frequently, there being no limit on the number of transactions in this account. Besides these, banks offer fixed deposit schemes of various types. These are aimed at helping individuals plan for future expenditure, like children's education, marriage and housing needs.

The terms of the deposits can be chosen to suit individual needs. Shop around for the best interest rate and for schemes like Autosweep, which automatically transfers any funds above a specified limit in SB accounts to Fixed Deposits. Recurring Deposit schemes offered by most banks are a way to build up savings through regular monthly deposits of fixed sums for a selected period of time. Such schemes are ideal for salaried people. Again, shop around for the best features on offer. Many banks offer specialised schemes for NRIs. These also include investment in securities, shares, company deposits and immovable property. The watchword for any bank saving scheme is SAFETY. Keep this in mind while looking at investment/savings avenues.

NBFCs were popular saving avenues at one time, offering high returns. However, risks were proportionately high and liquidity poor. Competition forced the interest rates to fantastic highs, causing investors to flock to the mushrooming finance companies. However, their popularity crashed when such companies folded up rapidly, leaving thousands of investors in financial ruin. Now, NBFCs no longer accept deposits. Many manufacturing companies take fixed deposits, offering rates of interest that are higher than banks. The risk factor is also high and the money is locked in for varying periods.