Why your savings are better in a mutual fund than a Barni

The barni has been a quintessential feature of Indian homes for generations. It’s a container that has been traditionally used for storing the household ration and also plays an integral role in the annual family ritual of making pickles. But this indispensable element of Indian culture has another use as well. It has often been used to hold a portion of the family’s savings for safekeeping – commonly practised by women to save for the proverbial rainy day. 

While the cultural norm may have its origins in a time before modern finance, the uncertainties in the wake of COVID-19 have made people turn to the barni again. Like people were hoarding essentials at the beginning of the pandemic, the same panic is making people stockpile their money at home. They are finding comfort in holding their money where they can see it, assuming it will be safe from the unpredictability of the times. 

Barni vs mutual funds

The barni may be effective in keeping a wad of cash safe but that’s all it will be. Sitting idle and isolated, your savings increase only when you add to them but they do not grow. When you turn to the amount after a period of time, it may not even be of the same value as it was when you stored it. We all know the concept of inflation and that money loses its purchasing power over time. In contrast, directing your money towards mutual funds is a much smarter choice that also reaps benefits. As the popular saying goes, make your money work for you.

You may have put away a portion of your savings in a barni. The time has passed and the amount has remained unchanged. If the same was invested in a mutual fund, you would have earned returns on it with the passing of time. When you have money to spare every month, it’s great to develop a habit of saving. You can start a monthly Systematic Investment Plan (SIP) of an amount comfortable to you and it will be just like when you put your money in a barni. You can choose a liquid or an ultra-short term fund if you will need the money at a point in time. You can choose a hybrid or an equity oriented fund if you wish to grow your money over the long term. The mutual fund SIP keeps accumulating money over time – the only difference is, in a mutual fund, your money brings you gains. Simply put, mutual funds are a way to save with advantages.

Safe savings

But what about safety, you may think. Don’t let the word ‘investing’ misguide you. When you’re directing your savings to a mutual fund, your individual money is not getting invested in a particular company. Rather, a mutual fund is better understood as a pool of money collected from many individuals like you. Further, this accumulated amount is not concentrated on any one company. Instead, professionals who know and understand the market invest the funds in various assets. This collective resource diversified into the market ensures you never have to lose sleep over a company’s stock suddenly crashing. 

These are valid reasons that make mutual funds a favoured choice with investors with a low appetite for risk. Most women have commonly played a passive role in saving money, preferring to simply put away a certain amount. Mutual Funds can be a great first step for women to become active investors and set their path to financial independence. So, give your savings freedom from the barni and reserve it for its true purpose.

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Views expressed herein, involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied herein. HDFC Mutual Fund/AMC is not indicating or guaranteeing returns on any investments. Readers should seek professional advice before taking any investment related decisions and alone shall be responsible.