The supermarket may contain everything under one roof, but if you spend a little time comparing prices, you will find that local shops carry items of the same, or better quality, and at better prices. You’re also assured of freshness if you go to the market.

Where does your monthly salary go? Do you allocate a certain amount to be spent on the house, or is it a case of buying things as you need? Did you know that there are huge savings to be had from maintaining a budget, and not just in terms of cost?

What is household budget management?

Managing a budget for your household is more than just keeping track of all the expenses for the month. It is a chart of how much income there is, how much will be spent, and what can be saved. The idea of the budget is to broadly plan for living within your means. A budget ensures that bills are paid on time, household debts are cleared and savings goals are set and achieved.

A really simple way to do this is to label different envelopes with the heads of all the recurring expenses of the month (such as rent, electricity, help, car EMI, etc.). You then know exactly what is going where, and if there is any left over, it can either be carried over to the next month, or set aside as a saving.

You could also project your monthly income and create accounts from which to debit or credit money as bills are paid and income is received.

Where do you start?

• Begin by making a plan

Create an inventory of needs and wants, from the biggest to the smallest. Learn to differentiate between needs and wants; those things that are essential to living, and those that make your life better. Categorise between non-negotiables (such as food, rent, clothing, education, transportation, and insurance) and everything else. Or further divide into what is necessary, what is adaptable, and what is expendable.

• Select an appropriate budget format.

You can download these for free from the Net, or create one of your own. You need to ensure your spreadsheet works on a monthly cost basis, so all income and expenses should be multiplied or divided to fit this calculation. A weekly expense should be multiplied by 52 (weeks in the year) then divided by 12 (months of the year) to get a monthly equivalent figure. A quarterly bill should be divided by 3 to get a monthly amount etc.

• Track your expenditure for a month to establish your spending pattern.

This also allows you to prune out those things that can be classified clearly as ‘frills’.

• Become a conscious spender.

Now that you have an idea of where your money goes, you have to actually keep that in your mind while you spend. And set aside time to review your finances and expenditure on a weekly basis.

• Go local.

The supermarket may contain everything under one roof, but if you spend a little time comparing prices, you will find that local shops carry items of the same, or better quality, and at better prices. You’re also assured of freshness if you go to the market.

• Prepare for the unexpected.

Car repairs, medical costs, weddings and birthdays, appliance maintenance, emergency travel, all qualify as additional expenditure, which you can actually plan for with the help of your spreadsheet, now that your finances are clearly laid out before you.

Reassess the budget after one month, making any adjustments that are necessary. Assess again after three months.

Making and maintaining a good household budget: Tips

• Share responsibility.

If you have a family, then it’s very important that they know and understand how income is distributed over the month, and what it is you are working towards. You can even ask your children, if they are old enough, to contribute to the budget. You will be surprised at the innovative suggestions you will receive. Most importantly, you have buy-in.

• Set targets.

Save money on a monthly basis to achieve your target, whether it’s a high end mobile phone, or a holiday. Don’t succumb to instant credit card purchases or EMI payments on the smaller stuff. In fact, put away your cards and stick to cash.

• Think out of the box.

Emergencies are natural, and you will find yourself strapped for cash at times. The point is not to panic, but figure out a way in which you can spend less, save more, yet continue to live in the manner to which you are accustomed.

• Review what you want.

Differentiate between what is meaningful, and simply ‘keeping up with the Joneses’. Continue to do this often, because your desires will change, as you grow.

• Be flexible.

A budget is not meant to tie you down; rather, it gives you defined economic freedom, not financial restriction.

A good budget allows you control over your money, helps you enjoy rather than worry over it, makes spending more purposeful, and protects you from financial problems.

The general perception that women are shopaholics who love to spend and very bad investors could very well be a thing of the past with more and more women taking responsibility for their earnings and investment. This is critical nowadays, where single incomes are no match for a bloating inflation! A well-planned double income often becomes essential to plan investment goals effectively for a secure future and comfortable retirement!

However, when saving women need to keep the bigger picture in mind and save for themselves as well as for their family. It is simply not enough just to save money but they have to invest in order to get more returns.

Think of your long term and short term goals in life. For example retirement planning, your child’s higher studies, a dream home, world tour etc. could be your long term goals and your short term goals can be doing a part time course, closing your educational loan, marriage etc. Remember, inflation is always going to reduce the value of your money. Let inflation be an important factor in mind before you plan your investments.

Women need to master the art of investing, in order to stay financially independent and to plan for retirement. There is no particular age to start saving for your retirement. The earlier you start the better it is.

Investment for teenagers

It is obvious that women will not have much cash in hands as teenagers, but one can still cut down on unwanted expenses and save some amount of pocket money. You can save the money in Sanchayika scheme and use it to reach your short-term goals such as buying gifts for your friends/parents, for your own birthday party and so on. It will also help you build your savings habit.

Investment in your 20s

In their 20s, women decide their career and their future. Equities can be a good investment choice as you can take more risk when you are young. You can choose to invest in mutual funds for your long-term goals, as mutual funds will give you the benefit of professionals managing your money. Take up suitable health insurance plans at this age; this will take care of your medical emergencies. Make sure you have sufficient liquid funds to help you during emergencies.

This should be the right stage to decide your long-term goals; plan in such a way that the long-term investments give you good returns at the appropriate time.

Investment in your 30s

At this stage of life, women are generally married and likely to have children. They become responsible for their family, and they have to secure their children’s future. It is advisable to choose suitable term insurance plans and mutual funds that perform well. You have to choose educational plans for your children and tax plans for yourselves.

You can also choose to invest in real estate for long-term growth. Investment in gold is another good option; always buy gold in the form of coins or bars or invest in gold funds, never consider gold ornaments as an investment. Gold in the form of jewellery is only going to cause loss in the form of wastage and production/making charges.

Investment in your 40s

You will generally be earning more money at this age so try to increase your retirement savings and savings for your children’s marriage and their higher education. If you were planning to buy/build a house this would be the appropriate stage.

Investment in your 50s

As you will be nearing your retirement, better invest in funds that involve lesser risk. Try to transfer a portion of your investment in equity to debt because in case there is a fall in the market at the time of your daughter’s marriage you will have to face a loss and will not get sufficient money. Therefore, if you are planning for your daughter’s marriage, shift your funds from equity to debt one year prior to the wedding planned.

Investment in senior citizen savings scheme would be appropriate for women who are above 60 years, as you will receive more returns compared to other schemes. Bank deposits and FDs will give you decent returns and your money will be safe. You can also rent a part of your house and earn money out of it.

Choose the right investment options at the right age and keep yourselves and your family financially secure.

Returns on investment options like PPF and NSC lowered, by interest rate cutting of 0.1%

The government of India, amidst an environment of change and reform, has given the consumer another jolt, with the reduction of the interest rates for popular investment options and schemes. The interest rate for Public Provident Funds (PPF) and National Savings Certificate (NSC), have been reduced by 0.1% with effect from the start of the new financial year. The move doesn’t come as a surprise, as the government has been looking to cut cost overheads, and bring the economy back on track. What is surprising though is the category targeted by the financial policy makers, as PPFs and NSCs have proven to be great revenue earners for the Indian economy.

The interest rate for Public Provident Funds now stands depreciated at 8.7% from the previous figure of 8.8%, and that for the National Savings Certificate (five-year plan) stands at 8.5%. The ten-year NSC faced the same fate, as the interest rate came down to 8.8%. On the contrary, the government has left crucial interest rates, such as the savings deposit rate which stands at 4%, and the one-year time deposit rate standing at 8.2% unchanged, which is a major relief for the investor.

The unique targeting of these popular investment options is bound to save the government a lot of money, and since the cut isn’t the biggest, the consumers are not expected to back away from exploring the option, which still remains extremely secure and profitable. The profitability of the investment options is still not an issue, because the interest continues to be tax free, and the security levels uncompromised. The move has triggered a debate yet again, and although meagerly, but does contribute to the gloominess of the already lugubrious economic environment. The government continues to tread carefully, due to the volatile political and economic situation, and the move although somewhat unwarranted, will give it some head space to operate in, thus partially justifying its implementation.

Pranab and Bishwadeep both work in the same company, at the same level with the same salary. Yet, Bishwadeep is always relaxed and looks in control of his personal finances. If someone asked Pranab, what his net worth was or what the outstanding on his home loan was, he would give some off the cuff answers, which usually would be way of the mark. For the same questions, Bishwadeep would have the answer right to the last paisa.

So what? One may ask. The answer lies in the calmness and confidence of Bishwadeep at work, which is actually a result of his financial stability, which in turn, is a result of the biggest asset in Personal Finance: Your Pen and notepad. Silly it may seem but your pen and notepad could be the difference between a financially stable life and a not so stable one. Let us look at Bishwadeep’s life to know the secrets.

Making a budget and writing it too…

Like most of us, Bishwadeep too makes a budget, but where he scores is that he always makes it a point to write down each component of his budget on his diary. In fact, he has a long size diary so that he can write down everything on one single sheet and be able to view it too. His budget consists of Investments, Incomes, Savings, and Expenses and in that order! By writing down instead of making mental calculations, he is able to squeeze out many expenses and gain extra money to route to his investments.

At the end of the month when he checks his budget and realizes that he still has some surplus, his excitement is beyond comparison. When we do not write down the budget, there is always a lot of possibility of missing out some components, making errors in calculations and most importantly not having anything to compare against in the month end. Bishwadeep gets to keep his excitement and we carry on as if nothing happened.

The other risk of not writing down budgets is that we tend to justify unnecessary expenses, as there is nothing, which makes us liable to any commitment to keep within limits. A written proof of your budget will most likely help you in the mental policing.

Ten minutes every day…

The smile and excitement in Bishwadeep’s face is the result of a dedicated habit of writing down every single transaction relating to his money. This includes even the 50 paise he spends on buying a refill for his pen. Although this might look like he is being a downright miser or stingy character, for Bishwadeep it means the difference between saving Rs 300 or nothing. When we do not write our daily expenses, we will tend to miss out on many small bits, the Re 2 parking ticket, the 5 rupee beeda, the ten rupee toll fees, the 3.50 afternoon news paper and so on and so forth. Even 25 rupees unaccounted for in a day adds to 750 in a month. (Rs 750 saved and invested every month in a decent mutual fund would give Rs 1 crore at the end of 25 years!)

Make it a habit to spend just ten minutes to write down every single transaction of the day irrespective of the amount and it will give you a powerful picture of where your money is leaking every month. By writing it every day, the risk of forgetting anything is nullified.

Once every 15 days…

On the 10^th and 25^th day of every month, Bishwadeep does reconciliation (on paper of course) of his finances. This includes checking his bank account, updating creditors and following up with them, making sure there are no wrong entries on the credit card statements, investment records and every correspondence that he receives from Financial institutions and service providers. This way he is not only able to rectify any errors immediately, but also is able to record the data on his spreadsheet.

You should ensure that you regularly file all correspondence relating to money, including, bills and to record them on your notepad. This way you would be able to generate a comprehensive and accurate report of your cash flow. Once you are able to see your cash flow on paper, the entire perspective changes and you would realize that over a period of 4-5 months you are able to control your money better.

The last line

Although our brain and memory is one of the most fascinating things created by god, it is not prudent to depend on memory or mental calculations while dealing with your personal finance. Put pen to paper and see the entire perspective change instantly. It could be shock, surprise, excitement or any other extreme feeling, but be sure it would guide you to a better financial life. Keep (W)righting…!

It is a good idea to categorize your payments under different headings like daily living expenses, entertainment and vacation, health etc. This will give you a fair idea of how much you spend on different categories. It is easier to keep track and also control your expenses once you know how much portion of your earnings goes into each expense.

Getting married? Starting a job? Getting further education? Starting your own family? Have you planned for these important phases in your life? Good control over your personal finances will help you achieve the goals you have set for yourself and cope with changes in your life. How can you achieve that? The answer is having your own personalized budget.

How do you draw a budget that suits your need? Say, you are interested in taking an educational course and are thinking of taking a student loan. How will you accommodate this additional expense? To begin with, you need to draw your personal budget.

- The first step is to calculate your monthly income. Consider income from all sources including income from your investments. ——- A

- Next, make a list of your monthly expenses. For example, if you are a salaried employee, list your routine expenses like expenses on commute, food expenses, utilities, clothes, charities etc. Then think of any extraordinary expenses that you may have to incur during the budgeted period, such as home improvement projects or purchasing a car. ——- B

- It is a good idea to categorize your payments under different headings like daily living expenses, entertainment and vacation, health etc. This will give you a fair idea of how much you spend on different categories. It is easier to keep track and also control your expenses once you know how much portion of your earnings goes into each expense.

- Calculate the difference (A – B = C).

- The next step is to redraft your personal budget to include expenses related to the educational course like interest and principal payment, course fees, expenses on tuitions and books, loss of wages etc. If you still have a comfortable surplus of cash (C), you can finalize this budget. If not, consider the expenses that you can avoid and reconsider the amount of loan. Once you reach a bottom line that you are comfortable with, finalize your budget.
- When you decide the cash surplus / short you will be comfortable with, you should also think of the percentage of income you would ideally like to save for your future. Think of short term as well as long term or retirement savings.

You may compile your budget into an excel sheet or use a physical book or diary. Alternatively, there are several free softwares available online for the taking.

Here are a few tips of a working budget:

- Keep your working sheet as simple as possible and keep it clean. Each item and category should be clearly defined.

- It is a good idea to create a flexible spreadsheet or if you have a hand written budget in mind, leave – enough space to add items of income or expenses in the existing budget.

- Maintain budgets on a continuous basis. Ideally, one should have a monthly budget rolling into an annual budget. The annual budget should also be in line with the long-term budget.

- An important part of budgeting is keeping track of actual income and expenses and calculating variances. If variances are beyond acceptable limits, then it is time to revisit your budget and make necessary changes.

- If you have a long list of income or expenses, it is advantageous to use excel or other computer software. For example, by using excel you can add comments, format your sheet, create reports using certain information from the excel sheet.

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Can you survive a job loss for six months? Do you have some funds stashed away for such emergencies until you gather your reins and surge ahead confidently with a new job and a new plan for the future in place? What about a medical emergency? Do you have resources that you can tap into for such a scenario. If the answer is No, then it is time to take a serious look at how you manage your money.

Alert #1: You are terrible with bills and payments!

Maybe its forgetfulness or a laid back attitude or a chaotic lifestyle, whatever the reason, if you are laden with unpaid bills, get fined for late payments 70 per cent of the time, bounce a few cheques every 10 months, then it is time to take stock of your organisational skills, at least in your personal finance department.

Keep a monthly tracker, set reminders on your mobile, keep an online calendar that beeps when bill, insurance and other payment deadlines arrive, choose whatever means that you are comfortable with to meet the objective of being methodical with payments.

Sort bills in a folder, keep them accessible at one place.

Alert #2: You use your credit cards excessively and often take loans.

The golden rule is to spend less than you earn. Distinguish between your needs and desires. If you desire something too expensive, which you are tempted to purchase with your credit card, think twice.

Don’t splurge, see if it should be on your priority list. If it is a must have and you need it that badly, save for it. That will help you decide if you feel it is worth the effort.

Remember, too much debt will eat into your monthly spending and put a road block to any kind of saving, as you will be busy paying off your credit card bills and EMIs on personal loans for you to set aside anything for a saving.

Instead, try to reap the power of compounding interest by saving some funds. Once you are sitting pretty on a pile of money, you could then indulge in a well-deserved vacation or that powerful music system, you always wanted as part of your relaxing Sundays.

Alert #3: Obsessive, compulsive, impulsive shopping.

Well, shopping malls, branded stores and supermarkets lined with tempting new entrants were designed with you in mind. These places you should avoid like the plague, if you are not someone who checks the price tags of goods, but instead rely on the ‘I want it right NOW!’ mind frame.

Don’t stack your living room or your kitchen or your fridge, with things that are purchased without any rhyme or reason.

Take the example of Rema. She has to try out new brands, interesting gizmos that she has no use for, antiques that she fancies endlessly and also food stuffs, the packaged, canned, ready to serve, frozen variety.

Her living room is stacked with odd, terribly expensive antique pieces that she does not even have the time to look at, her fridge overflows with canned foods that are well past their expiry dates and she owns three different kinds of mp3 players which she does not use! You are now thinking what a waste of money! Exactly!

It is painful routine, but make it a habit. Keep a tab on your money outflow, make a note of what, where, when, how you spend. At the end of every month, track your bills using an excel tracker or a good old accounting notebook and shred bills that are not required retaining warranty papers and bills, for goods that can be returned.

Rema did that and realized how much more she could save with a little discipline!

Alert #4: You are a debt juggler!

Do you have a priority list of debts that you clear based on how heavy the late fee or charges are going to be or when next you need to repeat the use of that particular service? If this is the kind of lifestyle you lead, you need help!

Find ways to cut back on your monthly expenses and pay off all your dues as quickly as you can. Don’t let yourself into such a pins and needles situation again! Always cut back on spending, conserve on resources until to achieve control over your finances.

Alert #5: Cheques that bounce!

If you think you can write cheques that cannot be encashed and get away with it scot free, think again! Bounced cheques come with hefty fine amounts and establishing such patterns will not bode well for your financial track record.

Alert #6: Late and default payments.

It can be minor expenses like a fine for the video or book that you returned late or consistently incurred late payment charges on your credit cards or EMI payments. The former just piles on miscellaneous expenses that end up adding to a significant percentage, while the latter can lead to big trouble.

Making a habit of this consistently can get you labeled as a defaulter. Your interest rates and lending rates could increase at an accelerated pace on the basis of your track record for late payments. Defaults will be reported to CIBIL.

If a pattern is notice you will find taking a loan or applying for a credit card in future extremely difficult. CIBIL keeps track of all your credit and generates a report that clearly shows your past repayment track record.

Nowadays banks are keeping a close tab on these credit reports and base their loan decisions on the financial health of the loan applicant.

Alert #7: You don’t have back up funds in place!

Can you survive a job loss for six months? Do you have some funds stashed away for such emergencies until you gather your reins and surge ahead confidently with a new job and a new plan for the future in place?

What about a medical emergency? Do you have resources that you can tap into for such a scenario. If the answer is NO, then it is time to take a serious look at how you manage your money.

Small strategies will help go a long way! Here is a sample of a few things to start with, use your judgment and build on it. Give it plenty of thought, time, effort, patience, commitment and enforce a plan of action.

a. Start a savings bank account that is different from your salary account. Determine how much money you would need to comfortably and prudently manage your monthly expenses then transfer the rest automatically to your savings account, every month and keep it inaccessible for routine needs and curb any temptation to eat into these savings.

b. Prepare a budget and stick to it.

c. Keep your credit cards locked away atleast until you take control of your spending habit. One can also use a credit card to wisely keep track of monthly payments, but that is for people who can differentiate between a want and a need. Until you find yourself in that place, lock it away!

It is better to start as early as possible before you find yourself in a financial mess. Before you land yourself in big trouble learn to implement some rescue measures well in advance!

Keep watching this space on more such tips on managing your money.

While applying for a home loan one must bear in mind that there are several other factors besides the income which are taken into account while deciding the eligible amount for home loan to an individual. Thus while deciding on a property to buy the prospective customer must keep in mind the amount that he can obtain from the banks as a home loan depending upon his income and repayment capacity.

The Basic Calculation of Eligible Amount

The primary consideration in calculating the amount an individual is eligible for is the annual income. The monthly income and the expenses are compared and the remaining portion is considered as the repayment capacity which is the basis for EMI computation and then reverse calculations are used to arrive at the final figure one is eligible for.

For example if a person earns Rs. 20000 per month and his essential monthly expenses are Rs. 15000 then his monthly repayment ability is Rs. 5000 at an average interest a rate of 9% the monthly installment on a loan Rs. 100000 will be Rs. 900 for a tenure of 20 years. Now the Home loan eligibility in lakhs is approximately equal to the amount available for loan repayment divided by loan installment per lakh for the selected tenure. In this case this amount would be 5000/900 x 1 Lakh = Rs. 5.5 Lakhs.

Additional Factors

There are several additional factors which the banks must consider while determining the actual amount that the applicant is eligible for.

Suppose in the above example the house purchased gets Rs. 2000 per month as rental which increases the repayment capacity of the individual. Thus the eligibility will now be Rs. (5000+2000)/900 x 1 Lakh = Rs. 7.7 Lakhs.

The exact essential expenses of the borrower are difficult to estimate so a fixed percentage of income is considered as not available for loan payment. This percentage varies as per income bracket as the banks believe that those who are in higher brackets of income can spare a greater percentage towards repayment of the home loan. Thus the eligibility figure for them also increases accordingly. For high earning individuals the repayment capacity may even be taken as 60% of their salary thus increasing their eligibility substantially.

The Tenure Factor

Another factor that comes into play is the tenure of repayment, which affects the amount one is eligible for. For longer tenures the EMIs per Lakh of amount borrowed becomes lesser and thus the individual can pay for higher loans. Thus the eligibility for a 20 year loan tenure of an individual will be higher than a 10 year tenure for the same individual.

In certain cases additional factors such as income from other sources and expected increase in earnings are also factored into deciding the total amount eligible for. However if the applicant has other loan repayment liabilities at the time of applying for a home loan his net eligibility shall reduce as per the amount outstanding as other loans and the EMIs being paid towards those loans.

Saving account (SB) has been the unique link that joins a common person with a bank. It has come up with lots of changes from the past when people had the choice of few banks that too with one type of saving bank account in an offer. Now people have a variety of options to choose from to select the type of the most suitable savings account according to its requirement. The flexibility in the modern-day savings account structure has attracted a huge number of customers and also allowed banks to fulfill its financial inclusion duty.

The Evolution Phase

The saving bank account has witnessed lots of changes to reach the current state.  Earlier banks had norms to get the new account introduced by the existing clients but now such a model has been replaced with KYC (Know your customer) forms. The RBI’s saving bank account’s interest rate regulation has been removed and provided banks to offer its own rate. Now all the banks offer their own interest rate for the saving account, which is around 4% for most of them from an earlier rate of 3.5%. The saving bank account replaced the monotonous single offering structure with new age accounts customized based on customer demand and operation style. At present, every bank has multiple saving bank accounts to attract clients with diverse requirement profile. The banks have segregated customers on the basis of demographic segmentation, i.e. age, income and gender. Following are some important type of saving bank accounts offered by the banks:

1>     Senior Citizen Savings bank account

2>     Young Citizen Savings bank account

3>     Women Savings bank account

4>     Regular Savings bank account

5>     No Frill Savings bank account

6>     Student Savings bank account

7>     Preferred Savings bank account

With multiple products in offering and increase in the service level, the bank’s operating cost has also increased manifold. To recover the cost, banks charge service fees on its entire product by its predefined mechanism. Now a savings bank account requires maintaining stipulated balance as per bank’s norms. Such balance is called average quarterly balance (AQB) or minimum average balance (MAB) etc. Banks also offer anytime liquidity through debit/ATM cards, online banking, At Par Cheques, Mobile banking, phone banking, bill payment facility, DEMAT services, investment in Mutual funds, insurance, etc. and charges for such services according to its norms. The charges and offers by some of the prominent banks for Regular Savings bank account are as follows:

Source: From the Website of respective banks/institutions

The above table is just a glimpse of services and offering by the banks. Some institutions are even offering a zero balance saving bank account to attract a larger customer base. Obviously, the banks that have less ambiguity in an offer will appeal more to a prospective customer. Similarly, banks have designed distinctive product offers for senior citizens that suit their needs according to their age.  In such accounts the banks have either relaxed on the minimum balance criteria by lowering it or removed it completely. Senior citizens saving account (SCSA) has been framed with keeping in mind the account holder’s age and limitations. Banks like IDBI have no minimum balance requirement for senior citizens whereas HDFC and ICICI have lowered such constraints to half.

Basic Requirements to open a Savings Account

-          By a person in his / her name;

-           By two or more persons in their joint names payable to :

• Both or all of them or the survivor or survivors of them; OR
• Either or any more of them or the survivor or the survivors of them; OR
• Former / latter or survivor of a particular person during his lifetime or survivors jointly or survivor.

-          Certain non-profit welfare organizations are also allowed to open Savings bank accounts with banks.

Best Criteria to choose a suitable Savings Bank Account

With so many diverse products offered by the banks, it becomes very difficult for the customer to select the most suitable savings account. Following are some important points to consider while choosing a savings bank account:

1>     Monthly Balance Requirement: It is very difficult to maintain the minimum balance requirement as per bank’s norms and if the customer doesn’t adhere to such a rule, then they are liable to pay a penalty. Zero balance saving accounts should be preferred over others.

2>     Debit Card Charges: Debit/ATM cards are now the necessity of every account holder, so before selecting an account, the associated charges with debit cards should also be noted. Sometimes the cards’ issuance and annual charges are nil but there are transaction limitations so one should opt according to frequency of card’s transaction.

3>     Cheque book facility: It is the basic facility that everyone needs. If the outstation transaction is more than a saving account with more number of free ATPAR cheques/quarter should be preferred.

4>     Online Banking: Online banking helps in ticket booking, bill payments and most of the banking operations with a click of the mouse button. The customer should opt for a saving bank account that enables them to handle all the major financial operations such as investment, bill payment, bank enquiries, etc. without any technical glitch and free of cost.

5>     Sweep facility: It helps the account holders to earn more interest on the bank balance by transferring an amount over the predefined level to the fixed deposit account. The FD interest is paid on the basis of number of days for which amount is kept in FD.

6>     Other facilities: There are some other facilities specially customized for its customer needs, like the cheque collection at door, third party cash deposit, accidental insurance and add-on card for shopping, etc. Such offers should be judged as per one’s own need and application.

Future Prospects of Savings Bank Accounts

The usage of saving banks account has picked up quickly in last few years because of RBI’s initiatives and financial institutions increased penetration into rural areas.  Saving accounts are well set to grow further with better financial inclusion initiatives expected to be taken by the banks in coming years. It has now become a necessity for all i.e. a poor or rich, man or women, young or elderly; everybody needs saving banks account for a basic operation like school fees to pension cheque clearance. Saving accounts is proving to be a most effective tool that can reach and connect the life of 1.2 billion Indians and spread growth through valuable financial inclusion in their lives.

Banks have several deposit schemes that can be customized for people with varying needs. Deposit accounts can be opened by an individual in his own name (single account) or by two or more individuals jointly (joint account).

Banks offer different types of joint account relationships. Here are a few.

Either or Survivor

This is the most common type of joint account and is applicable between any two individuals. For example, if a husband and wife have a joint account with ‘either or survivor’ clause, either of them can operate the account and in the case of the death of one of the depositors, the other can continue or the final balance in the account along with all interests (as applicable at the time of closure) will be paid to the survivor. If there is a nominee for the account, the conditions will be the same and the nominee gets access to the funds on the death of both the account holders.

Anyone or Survivor

This type of account is normally held when more than two individuals start an account jointly. Here, any of the depositors can operate the account at a time and in case if any of the depositors expire, the others can continue the account and if required, the final balance along with interest will be paid to any of the survivor/s as requested.

Former or Survivor

In this type of joint account, only the first account holder can operate the account. The second depositor gets the right only on the death of the first after undergoing some basic formalities like submission of proof of death etc.

Latter or Survivor

This is similar to the former or survivor, but the difference is that, in this type of account, only the second account holder (latter) can operate the account. The survivor or the former account holder gets access to the fund only on death of the latter and on producing the proof for the same.

Minor’s Account

A savings bank account can also be opened in the name of a minor jointly with a guardian. Here, only the guardian is supposed to operate the account on behalf of the minor. The guardian should be parents or in special cases, a legal guardian, as appointed by court. Some banks allow minors above the age of 12 to open and operate accounts independently.

Things to remember:

• Any mandate / power of attorney for operating a joint account or authorizing another person on behalf of the depositors, is to be given by all account holders or with the consent of all account holders.

• All operational instructions and information in connection with the relationships formed is to be given by all the joint account holders irrespective of the mode of operation.

• If there is a nominee to a joint account, the nominee gets access to the account only when all the account holders cease to exist. In case if both the account holder and nominee is no more, the legal heirs of depositor/s will get the funds.

• Individuals jointly running a business can open only a current account for business transactions. In case of current accounts, only the person authorized by the company / management will have the authority to operate the account.

• In case of a joint account, all the depositors are singly and jointly liable for overdraft if any, even if the application / demand promissory note is signed by one of them.

• Financial transactions through net banking, will be available if the mode of operation is indicated as ‘either or survivor’ or ‘anyone or survivor’. The user of net banking in that case should either be the sole signatory or the authorised to act independently. User-ID and password for net banking will be issued to all account holders on request.

• Those who enter a joint account should be aware that all partners are liable for all the dealings in an account as a single or joint entity. So joint accounts should be opened only with someone you can trust.

Individual accounts may meet court restrictions and delays on the death of the account holder, in the absence of a nominee. This is not the case in a joint account where the survivor of the account is entitled to the balance, without any legal restrictions.

The markets have remained volatile over the past few months and there are no indications of a steady environment in the near future. Under these circumstances more and more people are opting to invest in safer avenues such as bank fixed deposits. In order to get a share of the money going into the FDs, mutual funs houses have come up with this unique concept of FMP which is can be considered as the mutual fund equivalent of bank FDs. The primary targets of these FMPs are conservative investors who look for safe and secure returns.

What are FMPs?

This is a relatively new concept as an instrument of investment about which the awareness is restricted. These primarily debt mutual funds which are close ended and have typical maturity periods of one to five years. These plans are created by fund managers who purchase debt instruments that are oriented with the maturity period of the plans.  By this method the investment is kept secured while market expectations are also met simultaneously.

Key Benefits of FMPs

There are several benefits of the FMPs which make them a lucrative option available in the market. The most important advantage of the FMPs is that for tax purpose they are treated at par with fixed deposits. Since they are basically debt funds they also enjoy all the benefits of the debt funds in terms of short terms capital gains as well as long term capital gains. For the short term capital gains, the income from FMDs as in the case of any debt oriented fund is added to the annual income and the taxation is done as income tax. In case of the long term capital gains, the income from FMPs, as in the case of all debt oriented funds, is taxed as the higher among the two – 10% without indexation and 20 per cent with indexation.

Comparing the FMPs with Bank Fixed Deposits

In order to understand the basic advantages of investing in fixed maturity plans as against conventional bank fixed deposits we will have to compare the returns from both these instruments both pre tax as well as post tax. Assuming an initial investment of Rs. 10000/-, let us study the variations in returns in different options.

In this table the various tax implications in different schemes of FMPs as compared to the tax implication in a bank fixed deposit is illustrated on an initial investment of Rs. 10000/- with a interest rate of 10%. Important derivations from the above table of comparison are as follows:

• The net returns from FMPs far exceed that by any bank fixed deposit.
• The dividend option is better when buying FMPs for less than a year.
• The growth option is better when buying FMP for more than a year.
• Maximum double indexation benefit can be achieved by buying a FMP towards the very end of a financial year which is eligible for redemption at the commencement of a future financial year.

Area of Concern in FMPs

While the FMPs may appear to be the ultimate investment option when seeing the above the table, there are a few shortcomings that one needs to be aware of when investing in FMPs. There are a few assumptions in the above discussed table which require a closer look.

• Firstly the above table assumes that the return from the FMPs and the bank FD is same. However this may not be true always. The actual return from a FMP is not secure or guaranteed.
• Secondly the FMPs may invest in commercial papers of a variety of businesses. Thus an over ambitious FMP may make aggressive investment in businesses that have lower CRISIL/ ICRA ratings thereby exposing the investment to risks.