Deewaar is one of those iconic bollywood films which established Amitabh Bachchan as the angry young man of Indian cinema. Even if you haven’t seen the film, you are probably aware of his famous dialogue,
” Mere pass bangla hai, gadi hai, bank balance hai. Tumhara pass kya hai ?
“Mere pass Maa hai. replies Shashi Kapoor”
Now you might be wondering what does this have to do with financial planning ? A lot actually.
Indians are obsessed with buying cars and houses (cmon, haven’t you been harassed by your parents / parents-in-laws to buy that flat and settling down). Nothing wrong with either of the goals.
It’s the obsession with a fat bank balance is what can become a bit of a problem. We aren’t sure if it’s Amitabh Bachchan’s iconic dialogue which was responsible for it but a big bank balance is seen as a sign of prosperity – a sign that you have arrived in life.
It also provides us with a lot of comfort and security, and again, there’s nothing wrong with aspiring to have financial security in your life.
It’s when you leave a large part of your savings or networth in a savings bank account or a Fixed deposit that the problem starts.
While you may feel happy and get an ego boost with the ‘Wealth Management Elite’ tag that banks confer on your account, you may actually be losing money in the process. Take a look at the calculations below.
If you have Rs 10 lakhs in your bank in a savings account, you are potentially losing around Rs 1.2 lakhs per year or Rs 10k a month –
This is the additional money you would have earned if your money was invested in a high growth asset with an average return of 15% per annum.
This happens because a regular savings account will give you a return of about 3.2% (after taxes) while a FD will give you about 6.3% (after taxes)
|Amount of Money in your Bank Account||1,000,000|
|Return on your money from various Options|
|Interest from a Regular Savings Bank Account (~ 3.2%)||32,000|
|Interest from a Bank Fixed Deposit (~6.3%)||63,000|
|Return from Investment in a good Fund (~15%)||150,000|
|Loss in Income on account of money in a Savings Account||118,000||9,833|
|Loss in Income on account of money in a Fixed Deposit||87,000||7,250|
We have taken an example of Rs 10 lakhs but the scenario above can apply to any amount lying idly in your bank account or a Fixed Deposit.
So yes, apart from your emergency fund, if you have a significant amount of your money lying idle in a savings account, talk to us to see how we can help you invest and grow your money better.