Keeping money idle in a savings account in 2025 is akin to storing ice under the blazing sun—it’s melting away, quietly eroding your wealth, warns CA Nitin Kaushik.
“People say, ‘At least my money is safe in the bank,’” Kaushik says. “But it’s not growing. It’s slowly dying under the disguise of safety.”
For countless Indian investors, the default habit of letting surplus cash sit in a savings account feels comfortable. However, financial planners argue that this so-called safety comes at a hidden cost: your money loses value over time because of low interest rates and persistent inflation.
The returns from savings accounts in 2025 remain dismal. Major banks such as SBI are offering just 2.5% on savings deposits, while private players like ICICI, HDFC, and Axis offer a slightly higher—but still paltry—2.75%. Even the more aggressive IDFC First Bank tops out at 3%.
Kaushik points out the stark reality: “Your Rs 1 lakh earns you less than a plate of pani puri per month. That’s not saving—that’s self-sabotage.”
The challenge lies in inflation. Even at moderate levels of 5–6%, inflation steadily eats away at the real value of your money. “Your ₹100 today will barely buy goods worth ₹94 next year,” Kaushik explains. “While banks pay you 2.7%, the market takes away 6%. In real terms, you’re running backwards.”
Idle money is lost opportunity
Leaving money idle in a savings account is like leaving an employee on the bench instead of working. Kaushik emphasizes that your money should be working for you. “Would you let your employee sit idle all month? Then why treat your money like it’s on vacation? Make it hustle,” he says.
Financial planners recommend that savings accounts should only hold essential funds for immediate needs or emergencies—typically 3 to 6 months of living expenses. Beyond that, money should be allocated to higher-yielding instruments that provide better returns without excessive risk.
Smarter alternatives
For investors wary of market volatility, several low-risk alternatives offer better yields:
Liquid Mutual Funds: Tax-efficient and offering superior returns, with average one-year returns of 6.92% as per Value Research.
Overnight Funds: Suitable for extremely short-term parking, delivering average returns of 6.33% over the past year.
Short-Term Debt Funds: Offering stability and slightly better yields than liquid funds.
RBI Floating Rate Bonds: Safe government-backed instruments.
Fixed Deposits: Still an option for ultra-conservative investors, though returns remain modest.
Kaushik urges individuals not to be deterred by small starting amounts. “Start with ₹500. It’s not about how much you invest—it’s about how long. Small steps today can grow into significant wealth tomorrow.”
The magic lies in compounding, which vastly outpaces the minimal returns offered by traditional savings accounts. “Compound interest beats bank interest every single time,” Kaushik stresses.
Liquid Funds: Accessibility and flexibility
Liquid funds, in particular, present a strong alternative to savings accounts. These funds invest in high-quality debt securities with maturities up to 91 days, ensuring low volatility. They don’t require a minimum balance, and there are no charges even if your balance drops to zero.
Redemptions from liquid funds typically follow a T+1 cycle. For example, if an investor submits a redemption request before 3:30 pm on a business day, the money usually hits their bank account by 10–10:30 am the next working day. However, redemptions placed on Fridays are settled the following Monday due to non-working weekends.
For time horizons of one day to a week, overnight funds are recommended, while liquid funds are ideal for periods ranging from seven days to three months. Investors should note that liquid funds may impose a graded exit load ranging from 0.0070% to 0.0045% if withdrawn before seven days. Most funds accept investments as low as Rs 500 in lump-sum transactions, making them accessible for all investors.
As Kaushik succinctly concludes, “Savings accounts are safe but slow. Inflation is the real thief. Don’t let your cash sit idle—make it work for you.”
In 2025, smart financial planning requires moving beyond the comfort of low-yield savings accounts and embracing instruments that protect and grow your wealth. For investors willing to act, even modest sums can set the foundation for a more secure financial future.
