Smart money
FINANCIAL TIPS
It is the time to do some smart thinking. When money-making becomes more and more difficult, households have to find simpler way to make money and safely. Here are a few ways to get more out of your investments.
Recurring bills: You have to pay a whole lot of bills - telephone, electricity, house tax and others regularly. However, when you are doing so through a bank account, use a recurring deposit (RD) to make payments. The interest, which is 8.5 per cent on the RD, goes on accumulating. As bill payment is a monthly headache, keep enough money in the RD that would pay bills for a couple of months in advance. The interest would go on accruing. So, your bills would get paid timely and you would also earn a higher interest on the amount. Also, returns on RD do not entail tax deduction at source. So, you save on tax too.
Another income stream: Try to get more monthly income from other investments. For example, a post office monthly income scheme hikes up monthly earnings, if a person and spouse decide to put money in a joint account, say Rs 6 lakh, which would give a monthly return of Rs 4,000.
Do you know, a child of 10 years can bring in own monthly contribution, to the family kitty? Simply, open a post office monthly income scheme in minor's name. The maximum sum can be Rs 3 lakh. The child's investment would earn Rs 2,000 monthly.
New bank schemes: Find out about banks that are offering accounts or deposits that can be useful to you. For example, a bank may be having ready cash deposit scheme, where money can be taken out of a fixed deposit any time. Some banks have a child saving- cum-recurring plan, where the money is transferred to the recurring account every month, to earn higher interest. There could be other schemes where a savings bank account comes free, with no minimum balance requirement, if you open a fixed deposit of Rs 25,000. A particular bank may allow starting a fixed deposit, at Rs 100, only. Take advantage of such schemes because they may offer better deals in terms of both liquidity and interest.
Variable investments: In times of financial crunch, though you may want to commit a certain sum for regular investment, it may become difficult to continue doing so. The reason — there is unexpected rise in expenses or financial difficulties or urgent chores. In such times, opt for schemes, where you can pay a lesser amount. For instance, in a flexi recurring deposits, any amount between Rs 100 and Rs 10,000 can be deposited, according to convenience of the depositor. This way you would keep on investing even during tough times. Also, a parent or student may open an education deposit scheme, where instalments paid every month are allowed to be decreased every year, while interest remains same.
Redeploy interest income: A deposit of Rs 1 lakh in senior citizen scheme would fetch Rs 9,000 interest per year. Keep on reinvesting the interest amount in a recurring deposit, yielding 8 per cent interest. After 5 years, the Rs 45,000 would turn into Rs 55,535 in the RD. Hence, a gain of Rs 55,535 - Rs 45,000 = Rs 10,535.
Insure cheap: Take a whole life policy, instead of one covering 15 years or so. This is because, as one grows older, one's premiums become lesser. That is, pay a smaller premium as years pass.
Stay put in PPF: After provident fund reaches maturity, don't close the account. A pleasant surprise: You would continue to get normal rate of interest, which provident fund offers.