Keeping money only in fixed deposits can be counterproductive

-Blue

Keeping extra money in a bank account or fixed deposit can be counterproductive. Your daughter can start investing her salary in more productive means that can help her grow her hard earned money instead of keeping it in a bank account.

As a first step, she can build a contingency fund in the bank account which can cover her six to nine months’ expenses. Once it is created or if it is already there, she can invest her monthly savings for her future needs. Some of these needs could be buying a vehicle, vacation, wealth creation etc. If she needs the money invested in less than three years, she can invest in debt, for future needs she can invest in three to five years. It can consider investing in equity with a mix of debt and equity and for any target above five years.

The fact that she transfers her salary to your account every month to avoid overspending shows a strong intention on her end to save. This habit of saving can be carried forward by following the strategy suggested above to make a good investment plan for yourself. Mutual funds are one of the best ways to invest in asset classes like equity and debt. She can make monthly systematic investment plans (SIPs) where the excess money from her account will be invested in mutual funds on a pre-determined day every month. This will help him to diversify the investments as well as the money earned will do more work for him. He is also in a position to invest for a long period and the compounding effect of these regular investments over this period will help him build a good portfolio, which will be much more than the money lying idle in the bank account.

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