17,000 new credit cards issued by ICICI linked to wrong users

An important financial impact of the Covid-19 pandemic has been that individuals have become very cautious with their money and its management.

The first instinct for many was to cut down expenses, especially those which were thought to be non-necessary.

This helped increased savings, which is a positive in the overall money management process. Not going beyond these savings can, however, lead to the savings effort going waste.

Here are a few things to watch out for:

Move money beyond a savings account

The first tendency of individuals is to put money aside in their savings accounts. This is a good first step but leaves the overall process only half complete. There are two reasons why big amount of money lying in a savings account is not ultimately beneficial for an investor.

The first is that the interest on money lying in savings account is now ranging between 3% to 3.5% which will not even be able to beat inflation. The other challenge is that if money is kept here, there is a chance that this might never get invested as other expenses come up and money gets diverted. It is important to move money beyond a savings account.

Safe might not suffice

There is a tendency among investors to try and look for something safe. The scars of the pandemic have made safety the number one goal for many individuals.

This makes them go towards traditional products like bank fixed deposits or traditional insurance policies, as have been done historically. Again the rate of return in FDs is now so low that there is a good chance that inflation may surpass these rates.

Ultimately this leads to an erosion in the value of money because with small growth rates, it will not buy the same goods and services in the future.

Invest according to your needs and diversify

Moving money in the right direction is by investing according to goals. To meet these goals, different asset classes and diverse instruments will come into play. Depending upon variables like goals, risk profile, investor’s age, etc, different combinations of financial and physical assets are available. Someone might need a mix of debt mutual funds plus equity funds while others might have a different need that could include real estate too.

This might seem simple, but it is probably the most important decision for an individual investor to take — ensuring money reaches the final intended destination is key to the success of all the efforts.

(The writer is founder, Moneyeduschool. Views expressed are personal)