Losing Money Silently? Why Parking Funds In Savings Accounts Could Be A Costly Mistake

Last Updated:July 04, 2025, 12:13 IST

Leaving money untouched in a savings account in 2025 is like storing ice under the scorching sun—it’s disappearing fast, warns expert

Leaving money untouched in a savings account in 2025 is like storing ice under the scorching sun—it’s disappearing fast, warns Chartered Accountant Nitin Kaushik.

“People often say, ‘At least my money is safe in the bank,’” Kaushik explains. “But if it’s not growing, it’s shrinking. What feels like safety is actually slow financial erosion.”

For many Indian savers, keeping surplus funds in a savings account feels secure and familiar. But financial planners caution that this comfort comes at a steep, invisible cost—low interest rates combined with inflation steadily reduce the real value of your money.

Interest rates on savings accounts remain unimpressive. State Bank of India (SBI) offers just 2.5%, while private sector banks like HDFC, ICICI, and Axis offer around 2.75%. Even IDFC First Bank, one of the more aggressive players, caps at 3%.

“Your Rs 1 lakh fetches you less than the cost of a plate of pani puri each month,” Kaushik says bluntly. “That’s not saving—it’s slow financial self-sabotage.”

Inflation Is The Silent Killer

At an average inflation rate of 5–6%, your money’s purchasing power steadily declines. “If you earn 2.7% and inflation erodes 6%, you’re losing value every day,” Kaushik notes. “Your Rs 100 today is worth just Rs 94 next year.”

Idle Money = Missed Opportunity

Kaushik compares idle cash to an unproductive employee. “Would you pay someone to sit idle all day? Then why let your money do nothing? It should be hustling—working to create more wealth.”

He advises keeping only 3 to 6 months of essential expenses in a savings account for emergencies. Any excess should be moved to higher-yielding, low-risk alternatives.

Smarter Alternatives to Savings Accounts

For conservative investors wary of market swings, several instruments offer better returns than savings accounts, without excessive risk:

• Liquid Mutual Funds: With average one-year returns of 6.92%, these are tax-efficient and easily accessible.
• Overnight Funds: Ideal for parking funds for a few days; they delivered around 6.33% in the past year.
• Short-Term Debt Funds: Offer better yields than liquid funds with stable returns.
• RBI Floating Rate Bonds: Government-backed and relatively safe.
• Fixed Deposits: Still viable for ultra-conservative investors, though returns are moderate.

“It’s not about the amount you start with—it’s about consistency,” Kaushik advises. “Even Rs 500 invested regularly can snowball into significant gains over time.”

Liquid funds are particularly strong alternatives to savings accounts. They invest in high-quality debt instruments maturing within 91 days, making them low-risk and suitable for short-term needs.

These funds require no minimum balance and offer easy redemptions. Withdrawals requested before 3:30 pm are typically processed by 10 am the next business day. For requests made on Fridays, funds are credited on Monday.

They suit investors with holding periods from seven days to three months. However, withdrawals before seven days may incur a small exit load ranging from 0.0070% to 0.0045%.

“Bank savings are safe, but slow,” Kaushik concludes. “Inflation is the real thief. Don’t let your cash sit idle—put it to work.”

In 2025, effective financial planning means moving beyond the false comfort of savings accounts and actively seeking better ways to preserve and grow your money. Even small investments, when made wisely and consistently, can unlock long-term financial security.

Aparna Deb

Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More

Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More

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