Money Tips
Why Your Savings Account Is Losing You Money to Inflation in India
An account balance can rise while its buying power falls. But cash also buys flexibility, so the answer is not to invest every rupee.
1. Compare rates using the same period
For an illustration, suppose savings earn 3% and prices rise 6% over a year. ₹1,00,000 becomes ₹1,03,000, worth about ₹97,170 in starting-year purchasing power: 1,03,000 divided by 1.06. These are assumptions, not current bank or inflation rates.
2. Give cash a purpose
Rent, emergencies and near-term bills need predictable access. Money reserved for these purposes is useful even when its return trails inflation. Separate this money from longer-term goals before comparing investments.
3. Compare risk as well as interest
Check the bank's published rate, withdrawal conditions and applicable deposit protection. A mutual fund is not a deposit: prices can fall and access terms differ. For longer goals, compare fees, taxes and loss risk rather than treating past returns as a promise.