Make Your Money Work

In this article, Prof. Ruzbeh Bodhanwala and Prof. Shernaz Bodhanwala, faculty at School of Business, FLAME University, Pune, highlight three financial products that should help senior citizens to maximise returns on their investment and have adequate liquidity for any emergency.

Let us understand the best way to have liquidity with minimalistic risk and decent returns. In this article, we will discuss three financial products which senior citizens can use as investment avenues. The biggest challenge that we can contemplate is not to have access to funds when there is a dire need, and in anticipation of this we generally keep a huge amount in our saving account and miss out on capital appreciation. How much money should be kept in saving accounts is a function of your financial requirement over the next 6-8 months.

If you need around ₹30,000 a month then a standard calculation suggests that you should have around ₹2.7 lakhs in a saving account. You can also choose to have a contingency fund for medical needs depending on the kind of insurance cover that you have and your health condition. If you have a full cover insurance plan then you need not worry about the medical expenditure and would require minimalistic liquid funds to take care of such emergencies. However, if your medical insurance cover is not adequate, then it is best not to take chances and have adequate liquidity which can cover your treatment expenses.

After setting aside money for contingency fund and medical funds, we need to plan for the best investment options which provide liquidity and assured returns. In this article, we will not discuss financial instruments offered by the Indian Post office in detail as they are known to many. When we need funds at a short notice, it is very challenging if we have invested in an illiquid financial instrument. A good balance of short-term and long-term instruments in your portfolio based on assessment of your risk profile is the key to effective financial planning.