Rs 2 Lakh In Savings? Here’s How Much More You Could Earn By Investing

Many Indians tend to keep their money idle in a savings account, prioritising safety and liquidity over potential growth. The ability to withdraw funds at any time offers peace of mind, but this comfort comes at a cost.

The downside is that standard savings account returns often fail to keep pace with inflation, gradually eroding the value of your money. While savings accounts typically offer interest rates of around 2.5–3% per annum, inflation usually hovers near 6%. As a result, keeping a large amount in a savings account can undermine long-term wealth creation.

If you have a sizable sum—say Rs 2 lakh—lying idle in your savings account, you could potentially generate much higher returns by investing it in other assets. Here’s what your money could earn if split equally between mutual fund SIPs and fixed deposits (FDs):

Investing in Mutual Fund SIPs

• Total investment: Rs 1,00,000

• Investment tenure: 5 years

• Expected rate of return: 12%

• Estimated returns: Rs 76,234

• Maturity value: Rs 1.76 lakh

Investing in Fixed Deposits

• Total investment: Rs 1,00,000

• Investment tenure: 5 years

• Expected rate of return: 7%

• Estimated returns: Rs 40,255

• Maturity value: Rs 1.4 lakh

(Do note that returns from mutual funds are subject to market risks and may fluctuate.)

As the calculations show, investing Rs 2 lakh in a combination of mutual funds and FDs could yield over Rs 1.16 lakh in returns over five years—far more than what a savings account would generate.

Moreover, the longer you stay invested, the greater the compounding effect, helping your wealth grow faster. Compounding allows you to earn returns not just on your initial investment but also on accumulated gains over time.

To strengthen your portfolio, you can also diversify into gold, real estate, Public Provident Fund (PPF) and other instruments. Diversification helps minimise risks while ensuring more stable returns.

Ultimately, the real difference lies between earning a return on capital (savings account) and achieving compounding growth (investments). Choosing the right instruments—after evaluating your risk appetite—can help you build inflation-beating wealth and secure your financial future.