Investments have become a norm for decades for every individual to have a sustainable and positive future. Gone are the days when people could save little and hope that they could manage in the future. The modern mindset of saving and investing has transformed people’s mentality of how money needs to be managed to live a fulfilling life.
Almost everyone who saves money from their income may follow the 50-30-20 principle, where the 20% part is the savings and investments part. To learn more about managing money and the principle, do check out our article ‘Is money management important for financial freedom’.
The 20% part of the principle helps people become disciplined to save money from their income. The riskiest but the most lucrative option to invest in is the stock market by buying shares directly or investing monthly using SIPs (Systematic Investment Plans). But the oldest and most common way to save money for the majority of people is by saving using Fixed Deposits, Public Provident Fund, and Recurring Deposits.
Using Fixed Deposits helps people build up their savings to use for buying certain items or spending on various scenarios like house renovation, etc. FDs can be useful for saving for a period of a minimum of 5 to a maximum of 10 years, as the interest is not very high compared to investing. The interest rates may vary for FDs depending on the bank’s Recurring Deposits are helpful to make an emergency fund where money can be used without disturbing the FDs and other investments. It can be created for a maximum duration of 5 years depending upon the bank’s policy and the interest rates may vary.
By far the most popular way to save money other than stock market investments is through PPF. A Public Provident Fund is a tax-free form of savings where a person is directly investing in the government as PPF is initiated and protected by the government. A fixed-rate is set currently at 7.1% but may change upon the government’s discretion.
A good & bad thing about the PPF which is departed by people a lot is the minimum tenure the savings are locked, which happens to be 15 years. For some, it is a good decision to build wealth without risk and for the long term. For others, it is a kind of compulsion as withdrawing is next to impossible. But PPF does have some guidelines which people can follow if they wish to withdraw prematurely.
So, do these forms of savings mentioned above still have relevance against investing only in stock markets and now cryptocurrencies as well? Most of the public, especially ones in semi-urban and rural areas and those who still lack the technology and knowledge of investing can gain tremendous use out of purely saving their money using FD, RD, and PPF to build their wealth. When they get sufficient knowledge about the stock market, they can start investing small amounts using SIPs.