In India, homemaker women have traditionally been at the helm of this practice. But today, they have multiple choices in terms of where to save money. Other than the most familiar option of a savings account at a bank, there are also safe deposit lockers, fixed deposits, mutual funds, etc. But if you just need a physical safety box for your cash, lockers have also been their go-to options.
The following graph sheds light on other leading investment tools as well.
Why have women traditionally preferred lockers
Women (and even men) use lockers to keep their valuables as they come in different sizes. Either the locker hirer (individual) or the joint hirer (in case of a locker jointly hired with someone) can open the safe deposit locker. A minor is not eligible to hire a locker.
There is a fixed deposit for covering the safe deposit locker's rent. Generally, a safe deposit locker is hired by customers to safeguard their cash and jewellery in case of loss or theft. Not only is it kept in a secured area under high-level surveillance, but entry and exit are also monitored at all times.
Why should lockers not be used?
There are many cons to a safe deposit locker. The bank charges for rental based on the locker’s size. Over time, it can slowly surmount up to thousands of rupees just for renting. Additionally, banks only allow specific timings for access to the locker.
There is a physical limitation to how much you can fit into the box. You have to keep track of the key to the deposit locker as displacing it can cause new issues. The valuables kept, if lost, are not insured while kept there. They are not necessarily fire or waterproof, and there is no guarantee against any damage.
And most important of all, cash saved in lockers offers no return on investment.
Safe and profitable alternatives to lockers
The primary alternative would be a savings account at a bank that has a slightly higher interest than a checking account. There is a limit on the number of withdrawals. There is also a monthly/quarterly service fee and minimum requirements which vary for every bank.
It is just as vital to know that the longer the account stays held and unused, the more interest is earned. If you are expecting such a situation in advance, saving money in Fixed Deposits is a much better alternative to simply holding a saving account of a bank.
Indian Post provides a few avenues for deposit called post office saving schemes. These were essentially started to instill the discipline of saving and give investment avenues to middle-class individuals.
Mutual funds are riskier than saving accounts or fixed deposits. But they are also generally accompanied by much better returns!
And this is just the tip of the iceberg.
Under Section 80C of Income Tax Act 1961, an Equity Liquid Savings Scheme (ELSS) allows a HUF or an individual a deduction of Rs. 1.5 lakhs, if they want to invest Rs50,000, lessening the burden of tax by subtracting it from the taxable income. Since it is a stock market investment, all equity investment risks are also applicable to ELSS.
Equities (shares) are tiny fractions of a company. Investing in shares of a company is a risky maneuver. With every loss or profit that the company faces, the investor goes through it as well. The number of shares purchased is directly proportional to the gain or loss encountered by the company.
In contrast to shares, gold also remains a popular choice. Generally, investors purchase gold as a mode of diversifying risk, with future derivatives. But they can also be a bit volatile in the short run.
How to decide where to invest
Reviewing your needs, goals and the term of investment is a good place to begin. The time frame varies according to the goals. Do not forget to make an investment plan. Chart up how much risk can be absorbed along with your goals. This would provide a clear picture of which type of investment product is suitable!
Diversify your investments. Do not, under any circumstance, put all your money in the same place. That would only multiply your risk factor. Be ready and open to financial advice. Avoid investment in high-risk products before understanding the risks. To cut it short, don’t take gambles, don’t stay too safe either; hit the sweet spot by taking calculated risks.
It is good to take risks as long as the repercussions are clear. There are many safe and risk-prone profitable investments available. Keep the money hustling since it is always better off multiplying itself instead of sitting around in a safe deposit locker!