Many people prefer to park their money in a savings account, believing it’s a safe and reliable place to store funds while earning a bit of interest.
However, if you’re looking to grow your wealth through interest earnings, keeping money in a regular savings account may not be the best strategy-especially in 2025.
Most major Indian banks like SBI, HDFC, ICICI, and Axis Bank are offering a measly 2.5% to 2.75% interest on savings accounts. With inflation hovering around 6%, your money is actually losing value each year, rather than growing.
Why Savings Accounts Aren’t Enough
Let’s break it down:
- Average inflation rate in India: ~5-6%
- Average savings account interest rate: ~2.5-2.75%
If inflation is outpacing your interest, ₹100 today might only be worth ₹94 next year in real terms. So while your money appears safe, its purchasing power is slowly eroding.
Where Can You Get Higher Returns?
One of the better alternatives in today’s financial landscape is liquid mutual funds. These funds offer:
- Approx. 6.9% annual return
- Tax efficiency
- Quick withdrawal options – money can be accessed within 24 hours
- Low risk compared to equity investments
This makes them ideal for short-term goals, emergency funds, or idle money you don’t need for daily expenses.
Short-Term Debt Funds Also Worth Considering
If you’re okay with a slightly longer investment horizon, short-term debt funds can offer even higher returns than liquid funds. These too are relatively low-risk and suitable for conservative investors.
And here’s the best part –
You don’t need to invest in lakhs. Many platforms let you start with just ₹500 per month, making this a great option for salaried individuals or first-time investors.
Pro Tip: Keep Only Essential Funds in Savings Account
Financial experts suggest keeping 3 to 6 months’ worth of expenses in a savings account for liquidity and emergencies. The rest of your funds should be put to better use in instruments that offer higher returns without compromising on safety or accessibility.