The Right Piggybanks to Put Your Lockdown Savings

For those of us who live in big cities, a significant part of our time flies in travelling from work to home and vice versa. Most of the times, work wins over life, and we ought to take help for things like housekeeping and cooking. Not to mention that the expensive movie tickets, shopping in malls, and buying unnecessary gadgets, have all been an explicit part of our lives. As you know, comforts come at a cost! 

Since the lockdown has banned us from commuting and getting domestic help, there is more time at hands than usual. Also, most of us are scared to order food from outside. Consequently, the lockdown has obliquely been creating several master chefs. You know how much money you have saved during the lockdown.

Also Read: Here’s How You Can Invest in Gold Amidst This Lockdown!

Isn’t it worthwhile to put that money to good use? Irrespective of however small or big you think it is, we suggest you to consider indulging that money in the following ways.

1. Emergency Corpus:
   
   If you have not thought of putting aside an emergency corpus, this is the right time to do so. Such a corpus can be of help during an unexpected economic crisis, such as the current one. Choose a financial product, such as the savings account or fixed deposit account, so you don’t have to worry about liquidity during the times of need.
   
   An FD account with an automatic sweep-in that sends debits to the designated savings account is the best choice. This can add more interest than a regular savings account. In contrast, you cannot expect higher returns when it comes to an emergency fund. A minimum of 12 months’ worth of living expenses must be put aside as emergency funds. You can, then, live peacefully irrespective of what confronts you. Expert advice—spare 12 to 24 months’ of expenses to build an emergency fund, and include the current EMIs for the calculation of monthly expenses. What if the loan moratorium is not available in the next emergency?

2. Medical and Life Insurance:
   
   Most of us will have a medical insurance policy for self that is sponsored by our employer. However, if you don’t have one for self or the family, think of the money as a signal from the heavens to purchase medical/life insurance. Very important—make sure that the medical insurance policy covers coronavirus treatment.
   
   When it comes to life insurance, stick to a term insurance policy that comes at a low cost. This is especially applicable to those who have financial dependents. Investment-based insurance policies are not a great choice in this context.
3. Mutual Funds:
   
   Take this option up only if you have covered the first two options and still have some money at hand. Here is a quick suggestion—

• Those with a low-risk appetite and a time horizon of fewer than three years can invest in debt funds.
• Those with higher risk appetite and a time horizon of seven to ten years can invest in equity funds.
  

Besides, experts suggest that you go for SIPs rather than investing a lump sum in mutual funds. Say, you have Rs.20,000 saved up. Instead of spending the entire amount at once, spend Rs.1,000 per month over 20 months. 

Finally, distribute the sum you have saved during the lockdown into the first two options suggested. Earning returns with mutual funds should not be your only priority because you know they are subject to market risks!

For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in