We recently came across an article, “Bank Deposit Rates Set to Fall in New Fiscal”, published by The Economic Times, and this made us realise that our FDs are actually losing our money!
The value of ₹ 100 deposited with a bank for one year in an FD carrying 6.90% interest (offered by SBI in April 2017) would fetch ₹ 6.90 towards annual interest.
But due to inflation, the real value of this would have fallen by ↓8.56%. (If inflation rate=8.56%)
That means the real value of the deposit of ₹ 100 has fallen to Rs 98.34 (8.56% – 6.90% = 1.66%)
Many people who invest in FDs do not even know that they should consider inflation, interest rates and taxation before zeroing on an investment decision. So instead of gaining money from their investment, they end up losing it.
Now, you might be thinking – “If bank Fixed Deposits are not a good place to put my money to work, how else should I be saving my money, smartly?”
We would say, invest in Chit Fund with The Money Club! You would be surprised to know that people have already earned more than 12-15% returns (annualised) on their savings in this innovative savings model.
What Is a Chit Fund?
A chit fund is a rotating saving scheme, also known as chitty, chit or kuree. It is an excellent financial instrument that serves as saving as well as a borrowing tool. As a saving scheme, the chit fund offers good returns on investment. As a borrowing tool, it serves as a reliable source of funds in emergencies or whenever the need for money arises.
In a chit fund scheme, a group of people come together to contribute a fixed amount of money every month of a fixed period.
What Is a Fixed Deposit?
A fixed deposit (FD) or a term deposit is a financial instrument offered by banks which gives investors a higher interest rate than regular savings account until the maturity date. FDs promise the investor a fixed rate of interest, and in return, the investor agrees to not withdraw or access their funds for a fixed period of time. In a fixed deposit, the interest is only paid at the very end of the investment period.
Chit Fund Vs Fixed Deposit
The basic difference between Chit Fund and Fixed Deposit is that the fixed deposit upon maturity offers a fixed return based on the rate of interest. On the other hand, the chit funds have comparatively high-interest rates than the fixed deposits, and the returns are paid monthly in the form of dividends.
A quick comparative glance at chit fund vs fixed deposit to help you get a fair idea of the pros and cons of choosing a particular option:
|Chit Fund||Fixed Deposit|
|Pays competitive interest rate than banks. Investors can get returns as high as 12-15%||Interest paid by banks range between 7.5-9.5%|
|The interest is paid in the form of dividend every month||The entire principal amount + interest is returned only on maturity|
|Liquid. The chit can be used for any planned or unplanned expenditure||Illiquid. The principal amount cannot be used by the investor if he has to incur any unforeseen expenditure|
Investing in a chit fund may result in higher profits than FDs. But do your due diligence and choose your chit fund wisely. Ensure that your chit fund company is either run by the state government or registered under The Chit Funds Act.
Download The Money Club app and start saving for all your needs