Q: My younger brother starts a job soon and I would like him to invest around Rs. 3000-5000 a month for assured returns. I would prefer a risk-free option where the money also compounds over time. Please suggest some options. — Shamik C
Ans: Dear Shamik. It’s wise to start saving and investing right from the get-go, and even small contributions made at the start of one’s working life could snowball into a fortune by retirement. Rs. 3000 to 5000 is a good amount to get started.
As far as schemes offering assured returns are concerned, I would advise you to try Voluntary Provident Fund (which can be accessed via the office-provided Employee’s Provident Fund scheme). In case the employer does not have EPF subscription, consider the Public Provident Fund. Do understand that these are retirement savings schemes with lock-ins. So the assured returns (8.5% and 7.1%, respectively) notwithstanding, these schemes are to be treated as long-term ones where you won’t have easy access to your money. The VPF contributions can be started by contacting the office payroll. A PPF account can be opened by visiting your bank or local post office with the necessary documents.
In order to shore up liquidity for urgent needs, I would recommend a simple recurring deposit with the bank where your brother has a salary account. The RD can be started, operated, and closed via netbanking and your brother should aim to save up at least 3-6 times his take-home income through this route in order to finance any emergencies.
Have a question on personal finance? Ping me on Twitter at @adhilshetty with the hashtag #AskAdhil. The writer is CEO, BankBazaar.com, an online marketplace for loans and credit cards.