Smart Money Tips

Money Club Chit Fund vs. Recurring Deposit

By April 21, 2018 No Comments

Saving money means putting money in a Recurring Deposit, isn’t it?

Money Clubbing is the “latest” way of setting aside a fixed amount of money regularly (weekly, fortnightly or monthly)

And, it is 10 times more powerful than an RD!

In a Money club one can pick up multiples ( 6-10x) of what one has saved till date but in RDs  one gets back only what they save with some paltry interest.

The way you save money in a Money Club is the same as you do in an RD but the returns you can make, if you chose not to pick the funds early on, can be eye-popping!

Here is an example of a real Money Club on our platform:

Table #1: Assume you invest in an RD with a bank

You earn Rs 70/- interest in 7 months.

The table below shows you the interest earned :

  • Monthly Installment = ₹500
  • Tenure = 7 months
  • Rate of interest = 6% per annum.
500 INR Monthly R.D.
InstallmentRate of interest (Annualised)MonthsM. V.Interest/Month
5006.00%751818
5006.00%651515
5006.00%551313
5006.00%451010
5006.00%35087
5006.00%25055
5006.00%15022
Total3500  357070

Table #2: Now, Assume you invest the same amount “WEEKLY”

You earn Rs 16/- interest in 7 weeks.

The table bleow shows you the interest calculation:

  • Weekly Installment = ₹500
  • Tenure = 7 weeks
  • Rate of interest = 6% per annum.
500 INR Weekly R.D.
InstallmentRate of interest (Annualised)WeeksM. V.Interest/Week
5006.00%75044
5006.00%65033
5006.00%55033
5006.00%45022
5006.00%35022
5006.00%25011
5006.00%15011
Total3500  351616

Table #3: You invest in your “WEEKLY MONEY CLUB”

You earn Rs 222/- as interest!!

The data in the table below is from a real Money Club where users have contributed ₹500 (approx.) weekly for 7 weeks. For the same investment of Rs 500 per week the investor made 95.40% annualised returns!

R.D. comparable interest earned in a 500 INR weekly Money Club
InstallmentRate of interest (Annualised)WeeksM. V.Interest earned
46495.40%752157
47195.40%652049
44395.40%548138
42195.40%445029
49195.40%351625
49495.40%251117
49495.40%15028
Total3278  3500222

Conclusion:

Monthly R.D.Weekly R.D.Weekly Money Club
Installment₹ 500₹ 500₹ 500 (approx.)
Tenure7 months7 weeks7 weeks
Returns₹ 70₹ 16₹ 222
Rate of Returns6 % p.a.6 % p.a.95.40 % p.a.

 

Assuming an SIP of Rs.3000 per month with the Money Club
Month123456789101112
Max Interest6.66.66.66.66.66.66.66.66.66.66.66.6
Interest Assumption666666656575
Saving Amount300030003000300030003000300030003000300030003000
Available Amount300060009373127551641420117241712857332847376634261648313
Total Clubs011223445678
Input059275918119411189717846237982392629684358474140247927
Output063006300126001260018900252002520031500378004410050400
Unused Surplus3000733455814451722713734647316318161213387
Monthly Earning03733826597031054140212741816195326982473
Total Kitty300063739755134141711721171255732984734663396164531350787

If you invest Rs.3000 per month in Money Clubs (i.e around 40+  clubs for 1 year), the total interest that you can earn will be around Rs.15,500  at a whopping 41 % p.a. rate of returns.

 

In Money ClubIn Bank RD (@7%)
Total Input (Rs)3600036000
Total Output (Rs)5078737449
Interest Earned (Rs)147871449
Returns Rate %
41%7.3%
Total Clubs invested in43na

 

The Eye Popping returns are possible because

  1. the interest rate is determined by actual real-time bidding amongst the club members
  2. the bank’s (spread) between the borrower and lender is also eliminated and distributed among the members.

Money Clubbing really unlocks the power of your hard earned Money. However, there is no free lunch! High returns come with associated risks as well. Please ensure that you are aware of the risks before you plan to dive in!

Happy Money Clubbing!  ?

The Money Club