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Personal Finance: Rs 500 or less? Here’re five smart money moves for you

The Public Provident Fund (PPF) is the best small savings scheme for investors in the general category.

Written by Adhil Shetty | Published: December 1, 2017 1:22:16 am
personal finance, savings, savings tip, tax saving schemes, personal finance tips, personal finance tricks, money saving, money saving tips, money saving schemes, investment, investment tips Currently, the annual returns from PPF are at 7.8%, higher than those offered by most term deposits.

At every month-end, your bank balance reaches its lowest. Let’s say you have a Rs 1,000 left. There is not a lot you can do with this money — or so you think. With Rs 500 or less, you can still make some smart moves. Let’s take a look at some of your insurance and investment options.

Rs 2-lakh personal accident cover, for just Rs 12

It might sound amazing, but it’s true. With only Rs 12 — less than the cost of a chocolate bar — you can buy the Pradhan Mantri Suraksha Bima Yojana (PMSBY), a personal accident cover of Rs 2 lakh. It’s a one-year policy for individuals between the ages of 18 and 70. It insures them against death or disability due to accident. In death, the nominee receives Rs 2 lakh. In total disability (described as “total and irrecoverable loss of both eyes or loss of use of both feet or hands or loss of sight of one eye and loss of use of foot or hand”), the insured gets Rs 2 lakh. In partial disability (described as “total and irrecoverable loss of sight of one eye or use of one foot or hand”), the insured is paid Rs 1 lakh. Several banks and insurance companies are participants in this scheme. You can buy your policy directly on your net-banking account, assuming it is Aadhaar-linked. The premium is auto-debited from your account. The cover terminates when you reach the age of 70, or non-payment of annual premium.

Enroll for PPF with Rs 100

The Public Provident Fund (PPF) is the best small savings scheme for investors in the general category. Currently, the annual returns from PPF are at 7.8 per cent, higher than those offered by most term deposits. Investment in and returns from PPF are completely tax-free, making it a tax-efficient option. You can register your PPF account via your net-banking with a minimum investment of Rs 100, and maintain it with annual investments between Rs 500 and Rs 1.5 lakh. Investments up to Rs 1.5 lakh in PPF can be claimed for tax deductions under Section 80C. PPF is a long-term investment with a tenure of 15 years, renewable by blocks of five years. Premature withdrawals can be made from the seventh year.

Ensure a guaranteed pension of Rs 5,000, by paying Rs 210

If you’re thinking long-term, why not ensure a pension income for yourself? If you are between the ages 18 and 40, you can join the Atal Pension Yojana via your net-banking account. The minimum investment tenure is 20 years. If you are 18 today, you can invest till you are 60 and ensure yourself a pension in multiples of Rs 1,000 up to Rs 5,000, for Rs 42 per Rs 1,000. The premium rises with age. If you start investing at 18, the premium for Rs 5,000 is Rs 210; at 39, it is Rs 1,318. While Rs 5,000 will be a pittance by the time you are 60, you will enjoy some guaranteed pocket money in retirement. In your death, your corpus will be returned to your nominee. If you have chosen to receive Rs 5,000, the corpus would be Rs 8,50,000.

Rs 2-lakh insurance, for Rs 330

Another government-backed insurance scheme, the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) provides a pure life cover of Rs 2 lakh. This works as a term plan and has no investment benefit. Individuals between 18 and 50 are eligible to buy it directly via participant banks and insurance companies. Just as the PMSBY, you can buy it from your net-banking account, and maintain sufficient balance in the account while enabling auto-debit so that the cover is renewed automatically each year. The policy will cease once the insured reaches the age of 55.

Start an equity mutual fund SIP, for Rs 500

This will be one of the best money moves you will make. You can start investing in the stock market and earn attractive long-term returns, starting with monthly contributions as small as Rs 500. You can register a mutual fund account online with a reputed fund house or fund aggregators. As you get older and your income grows, you can periodically step up your monthly contribution. Starting with an Systematic Investment Plan (SIP) of Rs 500, stepping up 20 per cent each year, and investing in a fund with a compound annual growth rate of 12 per cent, you will create a corpus of Rs 42.45 lakh in 30 years.

The writer is chief executive officer,

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