Before investing our money or time in anything, we should understand how fast we can liquidate our money when we need it. Of course, we are investing our money because it can work for us when most needed during our crises or for the new Horizon.
Without further ado, let us dive into the bank as an investment vehicle
Indeed bank gives us more liquidity than most investment vehicles, but it comes with its cost tag.
Bank provides us different accounts as a service. Some of the account types are
- Saving accounts (which is a high liquidity instrument but give us low return. maybe around 1 to 3%)
- A recurrent account is a perfect instrument if you are saving your money for your short-term goal). When I say short-term, it is 3 to 12 months.
- Current account this is mainly used by business and institutes for money transactions.
Bank provides us high liquidity, which means we can withdraw our money whenever needed it. We can start with UPI, ATM cards, Net banking.
Some of these services come with annual charges and minimum balance criteria. Of course, they will charge it because they must pay for infrastructure, employees, CEO, and other things.
So how long would it take to make your money double?
If your bank is paying a simple interest of 3.5% annually and has deposited 1 lakh, it would take 33 years to double your money. Oh, dear, this even called investment?
We will leave it for you to answer that question in the comment section below.
It would help if you always go for compounding interest whenever it is possible. Yes, it is easy to say than done.
So, is there any risk involved in bank deposits?
Yes and no, it depends on which bank you park your money in. We all know Yes-bank, PNB bank issues. But overall, your money is safe in the bank, and you should never walk away from the bank system.
So how much of your money is suggested to park in the bank?
It depends on your immediate money requirement. However, we suggest keeping three months of expense or three months salary. Whichever is higher, this only applies when your health care and life are insured.
We have already talked about insurance in our last article so that you can find it here.
If you don’t have health insurance for you and your family, it’s better to have at least 12 months of expense or salary reserves in the bank or cash to manage risk.
What future holds for banking?
There is extensive research on “blockchain technology,” a possible alternative way to do money transactions. It is not legal in many countries, but this will be the mainstream of transacting money shortly.
We will do a separate blog about blockchain.
If you like to get started quickly in crypto, you can open an account with Wazirx. We have invested our money, and we feel safe about Wazirx. To get started, click here.
Because of COVID 19, many reserve banks worldwide have cut the interest rate to stimulate the economy. So you expect lesser returns from the bank.