You and me, everyone want to keep our money in safe accounts. Along with it, we also want to grow our saving. However, everyone can’t take the same risk. We have different situations and different attitudes. Most of us are not ready to take a risk for higher growth. Keeping money safe is the priority. Higher return is a secondary concern.
There are many accounts in India which keep your money safe and gives you decent interest. I have made a list of top 10 accounts which are considered safe. Many of these accounts or Government schemes, thus these are the safest.
Among these 10 accounts, some are longer term saving options. While other accounts are designed for short term saving. I would also tell you about the saving account which is the easiest and flexible saving option. We can divide these saving plans into three broad categories.
Investment for Short Term Goal
These accounts are used to save money for the near term goal. Mostly we use these accounts to save money for 1-5 years. You should use these accounts when you want money in near future. The interest rates of these accounts are not the best.
- Saving accounts
- Fixed Deposit
- Recurring Deposit
Investment for Long Term goal/Retirement
You should go for following accounts when you want to invest money for the big and long term goals. These may be the education or marriage of your child or retirement corpus. You would get better interest rate along with the tax benefit.
- PPF Account
- Sukanya Samriddhi Account
- EPF Account
- NPS Account
Regular Income Accounts
These accounts give regular monthly or quarterly income. Hence, these are useful for retired people who want regular income from their lump sum amount.
- Monthly Income Scheme
- Senior Citizen Saving Scheme
1. Saving Account
All of you must have a saving account. This is the basic account given by the banks. The Jan Dhan accounts are also a type of the saving account. This account has following features.
- Every Bank opens saving accounts
- You can open a saving account for as little as ₹500.
- You have to maintain a minimum balance in this account. For most of the government banks, this limit is ₹1000.
- You can deposit or withdraw into this account anytime. There is no restriction.
- You get an interest on the deposit amount at the rate of 4% per year.
- This Account can be linked to the fixed deposit account.
- This account is mostly used to receive salary and make payments.
- Saving Account comes with the net banking facility and debit card.
- You can use the debit card at ATM or any shop.
- There is a basic saving account which can be opened with zero balance.
2. Fixed Deposit
It is the second most popular bank account. You must be aware of the fixed deposit. Most of us use this account to save money for a fixed period. This account gives us better interest rate than the saving account. You can open a fixed deposit account in bank or post office. Following are features of the fixed deposit account.
- The money is put for a fixed period. Normally, you can’t withdraw the invested amount before the maturity.
- You can choose the period of investment as per your requirement.
- You can open an FD account for one week to 10 years.
- The interest rate differs on the basis of the period. Normally, you get better interest for the deposit of more than one year.
- Most of the banks ask minimum ₹5000 to open an FD account.
- You can open many FD account in a bank.
- FD account can be linked to your saving account.
- You can make FD account auto-renew after the maturity.
- If there is a need, you can break fixed deposit before the maturity.
- If you withdraw FD amount before the maturity, the interest rate comes down to the prevailing rate of the used duration. Along with this, there would be 0.5% reduction in interest rate as a penalty.
- You can take a loan against the fixed deposit. The interest rate would be 1-2% higher than the FD.
- There would be a tax deduction if interest income exceeds ₹10,000 in a year
3. Recurring Deposit
Recurring deposit is an advanced type of fixed deposit. It has many features similar to the fixed deposit. However, it is designed for the regular savings. You can open an RD account in bank or post office. All the formalities are similar to the fixed deposit.
- In the recurring deposit, you have to deposit amount monthly.
- The minimum period of months should be 12-120. i. e. you have to Open an RD account for at least 12 months. The maximum period for RD is 10 years.
- The regular deposit amount should be same for the whole period.
- The rate of interest would be same as fixed deposit. If you open and FD account of 5 years at the rate of 8%, the RD account would also give 8% interest for the tenure of 5 years.
- The interest rate would remain same during whole RD tenure.
- There would be a penalty if you miss the monthly deposit.
- You can also take loan Against the RD deposit. The interest rate would be 1-2% higher than RD rate. Like fixed deposit, you can also withdraw RD balance before the maturity. The new interest rate would be applicable on the basis of completed tenure. There would penal interest of 0.5%.
- There would be a tax deduction if interest income exceeds ₹10,000 in a year
- Tax Saving Fixed Deposit gives tax benefit but money gets locked for 5 years.
NSC or national saving certificate is a post office small saving scheme. It is an advanced version of fixed deposit account. NSC is quite popular because of the tax benefit. You can get NSC from any of the post offices.
- NSC is a 5-year saving scheme. Your money gets locked for 5 years.
- You get a fixed interest rate during the five year period.
- The government reviews interest rate at the end of every quarter.
- Instead of any passbook or advice, you get a certificate of investment.
- The NSC certificates come in different denominations like a currency note. NSC certificate can be of ₹100, ₹500, ₹1000, ₹5000 and so on. These certificates are given as per your investment.
- The maturity amount is pre-printed on these certificates. Thus you know the maturity amount in advance.
- You can take a loan from the bank by mortgaging NSC certificates.
- National Saving Certificate gives you tax deduction under section 80C.
5. Monthly Income Scheme
Post Office Monthly Income Scheme gives you a regular income. You get the interest earning every month. Thus, this scheme is suitable to those who want a regular income against a lump sum amount. It is also a type of modified fixed deposit. That is why many banks give similar flexibility with their fixed deposit account.
- This account gives you regular monthly income.
- The interest earning is given back to your every month.
- This scheme matures in 5 years.
- At the end of 5 years, you get back the whole amount. Thus your money remains safe.
- You have to deposit minimum ₹1500 in monthly income scheme.
- The maximum deposit amount is ₹4.5 lakhs. In a joint account, you can deposit up to 9 lakhs.
- The Government reviews interest rate every quarter.
- To get regular interest, you must have a saving account with the post office.
- You can prematurely withdraw the whole amount but there are some conditions.
6. Senior Citizen Saving Scheme
It is also a post office saving scheme. This scheme is specially designed for the retired person. This scheme gives you a regular income. To get this income you have to deposit a lump sum amount at the time of opening senior citizen saving account. Following are the main features of this scheme.
- You can open SCSS account after the age of 60.
- More than one account is permitted.
- You can deposit up to ₹15 lakhs in all the SCSS accounts.
- It gives highest interest rate among all the post office saving schemes.
- The interest is paid after every 3 months. It is paid on the first day of April, July, October and January.
- The scheme matures in 5 years.
- You can further extend SCSS for 3 years.
- Premature closure of the account is possible. But there would be a penalty.
- The scheme gives tax benefit under section 80C.
7. Sukanya Samriddhi Account
Sukanya Samriddhi Account is a special scheme for the girl child. The parent of the child can open this account in the post office or bank. This Scheme also gives highest interest rate like senior citizen saving scheme.
- Guardian of a girl child opens a Sukanya Samriddhi account in the name of her child.
- You can open only two accounts for two girl child. The third account can be opened if the second and third girls are the twins.
- You have to open the account before your girl child completes the 10 years of age.
- There is no limit of deposit in a year. You can deposit as many times as you wish.
- You should deposit minimum ₹1000 in a year. Maximum deposit can’t exceed 1.5 lakhs/year
- The account matures when the girl turns 21.
- If the girl marries, premature closure of the account possible after the age of 18.
- In the normal course, you can withdraw up to 50% of the balance after the age of 18.
- The scheme is eligible for tax deduction.
8. PPF Account
It is a very popular long term saving scheme. PPF account gives you a decent interest rate along with the tax saving. People use this account to save money for children’s education and retirement.
- It is a regular saving scheme at least for 15 years.
- The account matures in 15 years. You would get the balance with interest at the time of maturity.
- However, you can keep on extending PPF account in the block of 5 years.
- You have to deposit at least ₹500/year and maximum ₹1.5 lakhs in a year.
- You can open the account in the name of minors as well.
- Loan and partial withdrawal facility are also available.
- The money remains secure as the government of India gives the guarantee.
- The PPF account gives higher interest rate than bank fixed deposit.
- The government decides interest rate after every 3 years. As of now, it gives 7.8% interest/year.
- It gives tax deduction under section 80C of the income tax act.
9. EPF Account
Employee Provident Fund Scheme is mandatory retirement saving account for the private sector employee. You must be aware of this forced saving if you are an employee. This scheme helps in building big retirement corpus for those who don’t enjoy a government pension.
- The EPF account starts with the joining of the job and closes with the leaving. That is why this account matures when you reach at the age of 60.
- Every employee has to deposit a part of its salary into this account.
- The employer has to also match the amount and deposit it into the employee’s EPF account.
- The EPF account gives best interest rate among all the saving account listed above.
- The EPFO manages the investment and subscription of the EPF account-holders.
- The UAN has made EPF account portable. As Your EPF balance remains intact with the transfer of job.
- You can also partially withdraw from the EPF account if there is a pressing need. The needs are specified.
- If you get unemployed, you can withdraw whole EPF balance before the age of 60.
- An employee pension scheme is also clubbed with the EPF. This scheme gives you pension after the retirement. However, pension amount may not be sufficient
10. NPS Account
National pension scheme or NPS is a retirement saving account for all. Originally, it was launched for the central government employee. But since 2009, anyone can participate in this scheme.
- You have to deposit regularly in the NPS account. It is mandatory to invest once in a year.
- You have to deposit minimum ₹6000 in a year.
- There is no limit for maximum deposit.
- The scheme works like a mutual fund scheme. The return of your scheme depends upon the market condition.
- You would get a greater return if there is a high-interest rate.
- This scheme also gives you the option to invest in share market.
- You can change the pattern of investment twice in a year.
- The scheme matures when you complete 60 years of age.
- AT the time of maturity, you have to take an annuity plan from 60% of the corpus. An annuity gives your regular monthly income for life time or for a specified period.
- You can withdraw 40% of the corpus as a lump sum.
In this post, I have listed those accounts which are safer. But these investments can give you a limited return. If you want to earn a higher return for wealth creation, you should consider the high growth investment such as shares, mutual funds and property.