Last month, we saw how you can save a portion of whatever you earn. This month, we will explore a few attractive avenues that are available to grow your savings steadily.
If you are just starting out with saving money, you can go for one of the several “Kids bank accounts” that are available in the market. Take your parents along and evaluate the services provided by different banks for their Kids bank account clients. Also, shop around to see which bank is offering the highest interest. You do want to grow your savings, don’t you? So, it makes sense to keep your money with a bank that offers you a healthy rate of interest.
Look at options
For those of you who have been saving money for some time, there are better options. You may go for a fixed deposit as it offers you a higher rate of interest compared to a simple savings account. However, keep in mind that a fixed deposit does not allow you to withdraw your money whenever you want. In case the banks do not allow you to open a fixed deposit or if the money that you have is too low for an FD, you can request your parents to help you out with the FD. If you shop around, you will find that there are banks offering close to 10 per cent for a year for the FD!
Is there a way to get more money other than what is offered for a fixed deposit? Yes, there is. But before that you have to understand that keeping your money with your bank is same as lending money to your bank. Now that we know this, is there anyone else to whom we can lend money at an interest rate higher than the bank FD rate? You can lend it to your friend or your neighbour, but in these cases, there is nothing that you can do, if your friend or neighbour is unable or unwilling to repay your loan.
A much better alternative is to lend to businesses that are successful and are known for their ethical behaviour. If you can lend to them directly, rather than lending to a bank which then lends your money to the business, you can earn higher interest than what you can get from bank deposits. But how do we know which are successful and ethical businesses? You must have heard of companies belonging to the Tata group or the TVS group or other business groups which are well respected by people. You can do a web search to see if they are borrowing money and if yes, then at what interest rate are they borrowing?
Next month, we will see how we can use publicly available information to see if a company is strong enough to lend to.
Young World Money-Wizards Quiz #20
Do you have a grandmother or grandfather at home? Do you know how your grand parent can help you earn interest that is higher than the normal bank fixed deposit rate?
If you know the answer, email it to youngworld@money-wizards.com. The first five correct answers within seven days will each be awarded flipkart evouchers worth Rs. 250. The results and the answers will be published at www.money-wizards.com.
About Money-Wizards: A company in financial literacy and money education. They conduct workshops and after school classes on money education for school children. If you want Money Wizards programmes in your school or neighbourhood, write to Info@Money-Wizards.com
