Through today’s article we will talk about a mistake that we are all guilty of at some point of our life–“Keeping too much money in saving bank account”
India’s First Online Financial Advisory Portal, MoneyMindz.com discusses about this important topic common to every person’s life. We can understand that how confident you feel when you know that you have a big amount in your saving bank account and at the time of need you can just walk to the ATM and get your money within minutes. But you should know that there are also some downsides to it too.
MoneyMindz.com, Free Financial Assistance Advisory Portal will talk about 2 problems associated with keeping too much money in your bank account today.
You shall be wondering, how can keeping money in your account be a problem? As we all know that more money in account is a good thing, isn’t it?
Problem 1: Negative Real Return
Why not we talk about the small issue first?
Your money in saving bank account earns a small interest of just 3.5% per year. If you consider, inflation is around 7-8% on average and you also earn a negative real return (real return = return – taxes – inflation).
So, it can be seen that your purchasing power is only diminishing over time. The thing which you can purchase in future is less than what you can purchase today. But if the excess amount you keep in your saving account is very small, then it can be dismissed as the excess amount serves as your emergency fund in a way. But if you keep big amounts, it can be a problem.
Problem 2: The excess money gets spent unconsciously
It can be seen that many people don’t talk about this second point as it is related to behavioural finance. Although it’s a big topic but we will certainly try to cover it quickly here.
Money can be considered as water, as it finds its own direction, if you don’t provide it one!
Your mind can work in a very different manner if you have money lying in front of you. One of the principles of economics which is very much applicable to money is supply creates its own demand. Having money in saving account can lead to every possible reason to spend it. Basically, your spending will increase sub-consciously.
What can be done to resolve these issues?
Let us have a look at few things which can be done.
- You can start your SIP / Recurring deposit within 2-3 days after your salary date for your financial goals.
- You need to keep a minimal amount in your saving bank account (unless it is needed in next few days).
- You are not supposed to keep more than 6 months of expenses in your liquid mutual fund.
- If possible try to use cash and add only small amounts in online wallets.
- You can forcefully lock your money in financial products in order to win over your ‘lack of self control’.
- You should concentrate upon your financial planning and also be aware of the future targets that have to be accomplished.
Hope, with the help of this article provided by MoneyMindz.com, Best On-Call Financial Advisory Portal you are clear about the practical scenario of keeping too much money over saving bank account and its further consequences.
For more information visit: www.moneymindz.com or give a missed call to 022-62116588.
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