Beginner's Guide: The Most Basic Ways To Manage & Grow Your Money

If you're an absolute beginner looking for ways to grow your money, this post is for you.

We discuss the most basic ways on how to manage your money and also skim through the most sought-after ways to grow your wealth.

You might be a student-cum-freelancer, a fresher, or an enthusiast who wants to understand finances.

No matter where you are in your financial life, it is important to know that your money is not just for paying your bills.

To be able to do fun things with your money, you need to commit yourself to the goal of being financially planned.

Financial planning is not a destination, it is a journey. As cliche as it might sound, it can't be truer.

A small amount of discipline in your finances can go a long way. Even if all you can save is Rs. 500 per month at the maximum, you can surely reap its fruits in the long run.

Let's evaluate each investment option mentioned below is evaluated based on three parameters.

1. Liquidity: The ease with which the money can be withdrawn or made available in the form of liquid cash

2. Risk: The probability of losing the money invested

3. Returns: The rate at which the money would grow

Without any further ado, let's dive right into the most basic ways to manage and grow your money as a complete beginner in the realm of finances.

In this post, we will discuss about:

1. Fixed Deposits

2. Recurring Deposits

3. Mutual Funds

4. Insurance Products

1. Fixed Deposits

Fixed Deposits (also known as FD) are those deposits that keep your money for a fixed period of time at a higher rate of interest than a general savings account (3.25 to 3.50%).

The interest rate for fixed deposits ranges from somewhere between 4.50% to 6.60% depending on the tenure.

The higher the tenure, the higher the rate of interest. The tenure could range anywhere from 7 days to 10 years.

The liquidity of fixed deposits is medium. At times, premature withdrawal may cost you a penalty fee. Few banks may not allow liquidation online.

Risk is definitely ZERO as long as you choose a trusted bank.

Returns are LOW ranging from 4.5% to 7% depending on the bank and the tenure of the FD.

Every deposit of money calls for the creation of a new fixed deposit.

This is its biggest disadvantage as it gets absolutely cumbersome to keep track of multiple FDs.

2. Recurring Deposits

Recurring Deposits (also known as RD) allow people to save a fixed amount on a monthly basis in the same deposit without having to create multiple FDs while earning an interest of 4.5% to 6.5%.

3. Mutual Funds

Mutual Funds are a pool of money collected from people and invested in securities such as bonds, money market instruments, etc.

They are the perfect alternative for those who want to reap the benefits of the share market without directly investing in it.

There are several types of mutual funds and you are free to choose one that suits your needs best depending on the risk that you are willing to take and the returns you are expecting.

The most popular type of mutual fund is the Liquid Funds by virtue of being a low-risk, medium-return short-term mutual fund.

Liquid Funds do not invest in high-risk shares but in low-risk bonds or debt securities. The returns are around 7% on average.

4. Insurance Products

Insurance products are a hedge against the risk of a contingent or uncertain loss. They are predominantly a means of protection from financial loss.

Medical care is expensive, especially in the private sector. Buying a Health Insurance policy for yourself and your family is essential.

God forbid if an earning member of the family is on the hospital bed, the only way to prevent the derailing of your finances is to buy a health insurance policy.

There are some great insurance products with life cover as well as good returns. However, one must bear in mind that buying too many insurance products is not a wise option and may prevent you from investing in other avenues to optimize your finances to the best.

Although health insurances with life cover are an absolute must, it is important to carefully plan your insurance before taking the jump.

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For more exciting and fun bits of financial wisdom, do check out our other blogs on Quora and Medium!