In case of financial emergencies, your first instinct may be to liquidate investments like fixed deposits. However, by doing so, you will be compromising on your investment goals.
Importance of an emergency fund
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Mahesh works in the airline industry. In March 2020, when the Government announced a nationwide lockdown, all the airlines were grounded, and the cash inflows of Mahesh’s company dried up. The company delayed staff salaries for a couple of months. Mahesh was in a fix. His existing company was not paying him, and he could not look for a job in some other company as most companies had temporarily stopped hiring at that time. Mahesh did not have any savings to fall back on. It is during such a situation an emergency fund comes to your rescue. Let us understand how.
What is a Neo-bank?
Neo-banks are fintech companies providing 100% digital, cutting-edge banking services. They have done away with physical branches by moving all their services online and crafting digital banking solutions. The lack of physical branches helps neo-banks save on their banking overheads and extend extra benefits to their customers by cutting fees and expanding their services to the underbanked segment.
In the recent years, the penetration of smartphones has increased manifolds and all services imaginable are available at the tip of your fingers. Millennials worldwide are looking at services in a different light altogether and they expect the same of their banking experience. Traditionally, banking has been associated with a network of physical locations and cumbersome processes, but the current times do not leave much scope for this. Managing finances is difficult and confusing already. Millennials relate better to the mobile-first, simple and user-friendly ba
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Most of the above random investments start with the intention of tax saving, capital protection, avoiding risks, etc. But, they don’t have any end objective in place like a specific financial goal attached to them.
1) Tax saving: People are keen on saving tax. Hence, they end up making investments at the last minute without applying much thought to it. However, tax saving should be one of the objectives of investment planning and not the only one.
2) Capital protection: Fixed deposits attract the largest share of people’s investible surplus because people are concerned about the safety of their money. But, people don’t realise that fixed deposit interest is taxable which reduces their overall return. In a high inflation scenario, this lower return may result in negative returns after considering the impact of inflation.
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