The Savings Account Cocoon

All of us worry most about the things that are dear to us. A common example is our children. Since we worry too much about them, we tend to not let them go in the ground and play freely. Many parents feel that the children moving out of their house can be unsafe. Money is the next thing dear to all of us. We do not let the money go out of sight so easily.

Coming back to our behavior towards children, providing them the safety is a normal psychological trait all of us have. There are a few exceptions to it. Some parents do let their children go and play freely outside. Why does it happen that some parents allow their children to move around freely? Do they not love their child?

The parents who give free hand to children do understand that for a child to develop psychologically, physically and above all in all the practical aspects of life such as ‘dealing’ with others, they need to mix among other children in the society. A child become more enterprising if he exposes more to the outside world.

The problem is; certain other parents who do not allow their child to be exposed to this outside world. This child may be shyer and introvert in nature. This child can also face some practical dealing problems in his life in the future. We can say that these parents keep their child in a Safe Cocoon.

With a similar analogy, we tend to keep our money in a cocoon where we feel that the money is very safe and always available to us. That feeling of having money readily available for our needs can be the most common reason for letting the money be there in the Savings account. So most of the times; that cocoon is a Bank’s Savings Account.

For our money to grow; it needs to move out of that ‘Savings Account Cocoon’. The money needs to get exposed to the world. It is like a child who gets exposed the practical difficulties in the society develops the ability faster to deal with those situations. There are many alternatives where money can yield better returns (interest) than a savings account.

The parents who allow their child to move out and be a part of practical situations in the society always ensure that the society, area, and people where this child is active are safe for children to be there. Parents do take care of the child but at the same time, they want the child to be exposed to real-life challenges.

Similarly, when you invest somewhere other than the savings account, at-most care is taken by the Advisor so that the money should be safe but at the same time the money should yield returns and should earn better interest.

So, How Much Money one Should Maintain in the Savings Account?

Maintain the minimum required balance by the bank or the cash sufficient for 10 days expenses. This should take care of your immediate requirements. For the rest of them the amount can be withdrawn from the other instruments where we shall part the money.

What can be the Instruments where you can put your Money Instead of Savings Account?

You can invest the excess money, which is required by you for the next couple of months in Liquid Mutual Fund or in an Ultra Short Term Fund. Alternatively, you can also put this money into Arbitrage Mutual Fund. These funds will yield between 6 to 7%. One thing that we need understand is these returns are not guaranteed, however, the probability of earning these returns is high.

How much you can lose if you do not use these Alternatives.