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Priya Motiani

JWB Blogger

On World Savings Day, Jaipur’s Banking Experts Give You Savings Hacks!

  • JWB Post
  •  November 3, 2015

 

There is something incredible sexy about women who know their finance well and who can juggle the banking jargons effortlessly and independently. But sadly, what most of the women (and I include myself too) do is dodge the banking errands to their male counterparts.

I know ignorance is bliss. But ignorance is also regretful. Let’s steer clear of it today, shall we ladies?

So, to change this ‘footballer habit’ of us women and in lieu of World Savings Day (October 31st), Team JWB met Kamlesh Mandowara, Branch Manager, and Ankur Bhatnagar, Regional Head Sales, of a renowned multi-national bank to dive headlong into the complicated world of banking and to fetch out the best ‘Savings’ tips!

Grab a notepad, ladies! These savings hacks will make you scratch your head. NOT. Because we have broken the complex info down into digestible form!

Me: They say earning money is easy; saving, it is what is difficult. Tell us some ways in which women can save money.

Kamlesh: First and foremost the profiling of an individual is important to determine what saving options she should opt.7

Ankur: Let us categorize on the basis of age. Because people of different age groups have different savings needs and means.

Kamlesh: First let us talk about young women like you.

Age Bracket: (20-25)

Ankur: People falling under this age-group are usually students and first-time earners who are not very big on income.  Such people should go in for pooling small savings.

Let us start by saving at least 100 bucks per month. Come on, just like love, savings see no number.  

Kamlesh: For that, the first and most important thing to do is to have an independent bank account with a nominee facility.8

Ankur: Most of the people get a bank account without registering a nominee. This is a strict no-no!

Me: What happens in case a person doesn’t register a nominee?

Ankur: Then in case of any emergency that occurs with the account-holder, the family members aren’t able to access the money. There is a long set of legal procedures involving the court which needs to be followed then.

Me: Noted. Step 2?

Kamlesh: There are 3 types of deposits: Fixed Deposit, Recurring Deposit, and Savings A/C. FD and RD are traditional and widely-used products. There is a zero-level of risk involved here. So, these can be good options for people of this age group who usually have a scanty risk appetite.6

Me: Okay. These sound like familiar words. My Graduation in Management is coming back to me. Anyhoo, what I can’t remember is the rate of returns of these products. Enlighten me!

Kamlesh: FD and RD give you approx 8% and savings a/c earns you about 4% interest. Though there are some banks that give a higher rate on savings a/c.

Me: Yeah. But then that tiny little asterisk (*) in the end is usually the problem-bearer.

Ankur: See, higher the risk, higher the return. There are other investment avenues which offer better returns but they involve certain degrees of risk. SIP is one very fruitful product.

Me: SIP?

Meanwhile thinking to myself… SIP SLURP?!

Ankur: Systematic Investment Plan. It is basically an option under investment in mutual funds but this doesn’t require lump-sum payment.

Kamlesh: It is flexible just like RD. You’re supposed to pay a monthly amount (minimum: Rs. 1000).

Ankur: This has to be at least for 6 months.

Me: And what is the rate of return we are looking at?

Ankur:

  • It is somewhere around 15 to 20 % if you invest in it for a long term such as five years.
  • Also, after one year, your amount in SIPs becomes tax-free.
  • And there is also the benefit that inflation rate is considered in the calculation of interest under SIPs.

So, along with management, my economics too was coming back.

Ankur: The mistake that people usually do is they invest all their savings in FD. Now, there’s nothing wrong with it. But you’re missing out on a lot of other rewarding opportunities when you’re fixated on to one. This is also called rupee-cost averaging. Spreading your money in different avenues to minimize the risk and maximize the return.

Me: It’s like that famous saying: You should not keep all your eggs in one basket.7

Kamlesh: Absolutely!

Me: Another thing that I’ve noticed in my personal experience is that whenever people gather some savings, they buy gold out of it thinking that the value of gold will always rise.

Ankur: Yes. But this is a myth. When you buy gold, there are always some making charges involved. Come on, after all even the shopkeeper in front of you is there to earn some money from you. Also, when you buy gold, there are additional costs involved, for example, the cost of security, labour. You end up renting a locker to protect gold.

Me: Correct!

Kamlesh: So, the better way out for this is to go for ETF. Exchange Traded Fund. Through this mechanism, you can buy units of gold online. This is not physical gold, but tradable units. Benefits of this:

  • No safety/security concerns.
  • You can buy decimal quantities of gold for any odd amount. For example, here you can purchase gold for say 7896 rupees. Go to a shopkeeper and give him this odd amount and he’ll give you the looks!
  • It becomes your highly liquid asset.
  • No making charges or hidden costs involved.
  • Hassle free asset available at the click of a button.

Me: Wow! Now, I might sound dumb but I hadn’t ever heard of this option.2

Ankur: Another very interesting option for the women of this category is Home Loan.

  • The modern woman is independent. Having own house is a very basic and common want.
  • There is always an appreciation, never depreciation in terms of property.
  • In a home loan, the bank lends you 85% of the original amount of the house. The rest 15% is to be used from the individual’s corpus of savings.
  • EMI facility is available.
  • Most importantly, the govt. of India grants a tax rebate on the interest paid on home loans.
  • Also, in most of the cases, by the time you get possession of the house, the value of the house leaps up!

Me: And of course, as a bonus to these facts, you get a place to live in! Lol!

Kamlesh: These days, a lot of banks have collaborated with many eateries and theatres etc. Now, a free ticket may not make much of a difference to someone in their forties, but for the youth, such discounts and benefits are very appealing.

Ankur: You get reward points whenever you shop with the bank’s debit card. And these rewards fetch you amazing deals and discounts. And when you look at it the other way round, shopping with debit cards keeps one tension-free, hassle-free.1

Kamlesh: So, that’s pretty much about this age bracket. Let’s talk about 26-40.

Age Bracket: 26 to 40

Ankur: Let’s see what we have in this age bracket. There are married women, there are women with kids, divorced women, single mothers, working married women, etc.

Me: Yep! Savings plans for them.

Kamlesh: By this time, people are usually settled, especially in India. They have a stable source of income and secured jobs. So here they can look at long term plans for savings.

Ankur: FD is of course an option. Other than that there’s PPF.17

The acronyms they used literally led me to scratch my head.

Ankur: … Public Provident Fund. It is a fifteen year long rigid scheme because here you cannot withdraw your money before maturity. And if at all, you want to, you can only get 50% of the amount and that too after the completion of 6 years. This rigidity is good at this stage because it encourages long-term savings which can be used for your children’s education or marriage or for any other major expense.

Kamlesh: The returns are 100% tax-free here and the rate is approx 8.5%. Though, there is no liquidity. Beware of this fact before investing in them.

This entire process of understanding savings is not so taxing after all. Just saying.12

Ankur: Then you should work upon your life insurance plans.

Kamlesh: There are three types:

  • Term plans: Focus on life-cover. Does not enable savings. Single mothers should go for this type of LIC.
  • Traditional plans: They enable savings. The nominee receives the money on the death of the person.
  • Unit Linked: Here you get insurance cover + whatever amount you have paid. The amount is received on death of the person or maturity, whichever is earlier.

Ankur: Next, in your thirties, you should also start framing your retirement plans in such a way that you get decent corpus by the time you retire. This is keeping in mind the inflation rates!

16

And with that, my conversation with the two brainy bankers came to an end.

Savings is the word of the day and saved have we your time which you would have otherwise spent on Google baba! Ciao, until the next banking story!

Picture Courtesy: Pallav Bhargava

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