As soon as you receive the SMS of salary credited in your bank, you should divide it equally into 3 parts. First portion to run the family, second for the unexpected expenses which may occur at anytime and the last portion you should save for future development. You should not withdraw the money other than the amount fixed for the monthly family expenses. You can keep the money reserved for emergency in Savings Bank account. But the amount you kept for savings should be invested in a proper way.
There are so many options are available for investments these days. Like, Systematic Investment Plan, Recurring Deposit in a bank, or National Savings Scheme or monthly virtual gold investment plan ... We will discuss the two main monthly savings schemes which are gaining popularity today.
Recurring deposit is a monthly savings scheme. In RD you have to fill a required form to give permission for transfer of funds to your RD account. You can chose the period and amount for the plan. You will get the amount with interest when your period is over.
On the other hand Systematic Investment Plan is a monthly installment plan for investing in Mutual Funds. The depositor has to authorize his/her bank to release a particular amount to a Mutual Fund Provider monthly. Investors with the help of the Mutual Fund expert can decide which financial scheme is best for them.
There is zero risk involved in RD while SIP is for those who have strong heart and kidney only. Jokes apart, in RD your savings will not grow because of less interest rate, but in SIP you can accumulate wealth in a longer run.
While investing in RD you have to pay tax deducted at source if your interest amount exceeds some level. But in SIP, the earnings are capital gains which is tax free.
In Sip you can have the option of pausing the SIP when you have financial problems. But in RD if you are not deposited the amount you will be penalized.
These are the options before you. Select wisely and secure your future.