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Today’s young investors are staying away from savings accounts because low interest rates do not meet their needs. Inflation is continuously increasing, and in such a situation the money lying in the savings account loses its value. Now the youth are increasingly moving towards options that give better returns while still being safe.
New Delhi. Saving accounts have long been the most common option for keeping money safe in India. But low interest rates of 2.5–3 percent are no longer attracting the young generation. The inflation rate is sometimes double this, due to which the money kept in the savings account starts decreasing in real terms. The main problem for the youth is that savings remain safe, but their purchasing power reduces with time. This is the reason why young investors are now looking for such instruments which can provide better growth along with security.
The allure of high return options
Compared to savings accounts, mutual funds, digital FDs, debt funds and fintech wallet plans give higher returns to the youth. Through online investment platforms, they can start investing even with small amounts and get better returns than inflation. When inflation is around 5-6 percent, while the savings account does not even give 3 percent, then this difference becomes a loss for them. Therefore, youth are now increasingly choosing such investment options that can increase their wealth in the long term and maintain the value of their money.
Technology and financial literacy changed thinking
Today’s generation can easily manage their money through mobile apps, robo-advisory, digital dashboards and AI-based investment tools. Traditional bank accounts, which are branch-based and have limited facilities, now appear less attractive to the youth. Besides, increase in financial literacy has also made a big contribution. Youngsters now have a better understanding of risk, returns, compounding and portfolio management. They know that saving account alone cannot create wealth, hence they are focusing on increasing returns by dividing the money among different instruments.
Has the savings account become completely useless?
Young investors are definitely staying away from savings accounts, but are not abandoning them completely. They keep a small amount in the savings account as per their need so that cash can be immediately available in unexpected circumstances. They invest the remaining money in such options which give better returns and can meet their long-term goals. In this way they maintain the balance of security, liquidity and returns.
