Every Person has a bank account and most people even have surplus amounts lying therein account. The first step to financial planning has an emergency fund. It should cover a minimum of 1-2 months of expenses. Tt’s always advised to remain this amount within the savings bank account because it can be taken in use quickly. Also, it can earn up to 3.5% interest (Depend on Bank Rate) once a year. But what if I say there are better ways to earn a far better rate of interest on the emergency fund and is taken into account subsequent best liquid alternative to a bank account. Wouldn’t you would prefer to choose the simplest and best alternative?
What is a Savings Account?
Savings account in several banks in India offers interest rates varying from 3.5%-6.25%. on the common. A bank account is taken into account the foremost liquid kind of investment with immediate redemption. It’s nearly pretty much as good as having taken benefit hand but stored during a secure place. The interest earned is assured. Also, the banks do no change the rates frequently and are consistent over a period of time. The interest earned on a checking account is tax-free till Rs 10,000 and the TDS threshold is Rs 40,000 (to be implemented from April 1st, 2019). However, this interest income remains taxable as per individuals tax slab.
What are liquid funds?
Liquid Funds are debt mutual funds that invest in very short-term market instruments like government securities, treasury bills and call money. They invest in low-risk securities. They invest in securities that have maturity up to 91 days. Also, the typical return of liquid funds is around 6-9%. If you’re watching investing your surplus money for a brief time and worried about locking your money in fixed deposits then liquid mutual funds are the proper thing for you.
Why Liquid Funds are Better Than Savings Bank Account?
- No lock-in period: Liquid funds don’t any lock-in period.
- Easy redemption: Redeeming liquid funds is extremely easy and thus the cash is getting to be credited in 2-3 Hours within the individual’s bank account.
- The lowest rate of interest risk: Of all the debt funds available within the market liquid funds have the smallest amount rate of interest risk.
- Better returns than a bank account: One can expect a return of 6-9% from liquid funds once a year which is best than savings bank interest 3.5%.
- No minimum balance required: In savings bank account one possesses to maintain a minimum balance. In liquid funds, there is no limit on minimum or maximum investment.
- Different plans available: Liquid funds are available for various time periods like daily, weekly, monthly, dividend and growth plans. One can choose any plan supported their requirements and tenure.