The Hindu Business Line : Careful and astute

Saving for a rainy day is no less an investment for the middle-class woman. What are the options before her and what are the factors that influence her decision?

It's always been a question of budgeting for the middle-class woman. And with the cost of living in big cities having skyrocketed in the past few years, how does she save for a rainy day? What are the options before her? What are the factors that influence women — employed or unemployed, educated or uneducated — in choosing a suitable means of saving?

"I feel comfortable with fixed deposits (FD). I open the account and forget all about it till the date of maturity. And I have always opened only short-term FDs (mostly six months), because that allows me liquidity as and when the need arises. I can also renew it if there isn't any urgent requirement for the money. True, the rate of interest will be very low, but I know my money is safe and secure," says Aparna Moorthy, an employee in a private company in Chennai. Short-term deposits suit her better, as she is in a transferable job, she adds.

But it is mainly the security aspect that has propelled many middle-class women to banks in the past few years. "It's true we got a bit carried away by the tall promises made by the (non-banking) finance companies. It was a question of more interest, and that, for a middle-class person, is very significant. But when you weigh security of your capital against interest rates, the former gets our vote," says Rani Chandran, a Chennai housewife.

For Lakshmi Raman, also a housewife in the city, saving was always in the form of recurring deposit (RD) accounts with banks till her children grew up. "I would open the accounts for a year and ensure that the maturity dates fall during May and June, which is the beginning of the academic year. That would help me pay the children's school fees and other expenses," she says.

This is one trend that is quite common among middle-class women — saving money for some investment or the other whether it is buying consumer durables, investing for their children's education or even payment of the annual insurance premium."I know women doctors who have opened recurring deposit accounts in our bank only to use the maturity amount towards improving their clinic's infrastructure or opening a new one," says Pauline David, a spokesman of a nationalised bank.

Interestingly, illiterate women from the slum nearby have also opened savings account in their bank, she adds. "There are many young girls, who work as household maids and make roughly about Rs 600 a month, and yet they save Rs 100-Rs 200 every month. They later use the money for their wedding or purchase of jewellery," she says.

"We've also been successful in garnering more patronage from working women, especially with our monthly deposit scheme that has a catchy phrase like `Make your son a lakhpati in five years'. A deposit of Rs 1,460 a month for five years, grows to Rs One Lakh in five years, and this has found many takers," she explains.

Middle-aged women and senior citizens on the other hand prefer the safety and liquidity of FDs. Says Lakshmi, who had retired from her job, "Though I had RD accounts in the past, I now find it difficult to remember the monthly due date when I need to deposit the money... it becomes more of a liability. Now that my children are well settled and I lead a retired life, it is more convenient having FDs."

Adds Shanta K. Swamy, a septuagenarian Chennai resident, "Though the interest rates in banks have dropped drastically over the years, I still prefer bank deposits for the security that they offer. I know I can get back the money when I want. It's a lesson learnt after losing some money with finance companies."

For senior citizens like her, it is also important to have cash on hand for meeting their own expenses. Economic freedom — at least to some extent — becomes an issue of vital importance to them. That's one reason why they prefer FDs that provide them interest on a monthly basis. "The monthly interest is akin to a pension. That takes care of their medical bills, or meet any other expenses such as buying gifts for their children and grandchildren," says Pauline.

In this regard, post offices have been highly successful in attracting investors for their various schemes such as the Kisan Vikas Patra, the Monthly Income Scheme (MIS) and the Retirement Government Employees Scheme. "The MIS is a good scheme for senior citizens as the interest is as high as eight per cent. But its real selling point is the 10 per cent bonus that investors get at the time of maturity. And the interest can be withdrawn monthly; this is a regular return for the investor," says Rajam Venkatraman, an agent for Postal Saving Schemes.

Postal schemes are not just for senior citizens, she adds. "Schemes like the National Savings Certificate and the Public Provident Fund have been hugely popular with the working class as they have the benefit of tax exemption." According to her, there are many postal saving schemes that have the advantage of tax exemption or "No TDS", which make them ideal schemes for tax-paying working women.

Picture by Bijoy Ghosh

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