Create emergency fund
Salaried people should create an emergency fund for non-discretionary spends like utility payments and youngsters’s schooling for at the very least six months. During financial or job-related uncertainties, the scale of this fund must be elevated to cowl bills for at the very least 12 months. Without the fund, you might be pressured avail loans at excessive rates of interest or liquidate investments earmarked for essential monetary targets. So, think about using surplus festive bonus to create or high up emergency funds.
Prepay loans
If you might be servicing a mortgage with an extended residual tenure, utilizing bonus to prepay the mortgage is usually a sensible transfer as it should reduce curiosity value. While making prepayment, select the tenure-reduction possibility as it should save extra in the long term. However, the EMI will keep the identical. Opt for EMI discount possibility solely if you wish to elevate disposable earnings.
Buy life/well being covers
Life insurance coverage is designed to present monetary safety to dependents within the occasion of premature demise. Ideally, the demise profit have to be at the very least 15 instances of annual earnings. The most value efficient option to safe such excessive protection is to purchase time period cowl. Thus, workers with inadequate/no life cowl can mull utilizing festive bonus, or a portion of it, to purchase time period plans. Also, they need to have sufficient well being and private accident plans to protect themselves towards the monetary danger from hospitalisation or accidents.
Invest in company bonds/FDS
For short-term monetary targets, buyers ought to choose fastened earnings devices like FDs and bonds.
As the repo fee reduce of 100 bps this calendar yr led to an enormous drop in financial institution FD charges, extra cuts could push FD charges down additional. Thus, for secure and warranted returns, think about using bonus to put money into high-yield FDs. The highest FD slab charges supplied by some small finance banks (SFBs) are nonetheless 100–150 bps greater than these supplied by most PSU and huge non-public sector banks. Also, SFBs have been categorised as scheduled banks by the RBI and deposits with SFBs are insured below the deposit insurance coverage programme of DICGC, an RBI subsidiary. This covers deposits (financial savings, FD, recurring and present accounts) of as much as ₹5 lakh held by every depositor with every scheduled financial institution. For these with barely greater danger urge for food, investing in company bonds is usually a good different to earn greater fastened curiosity earnings. These bonds normally provide greater returns than financial institution FDs, small financial savings schemes or authorities bonds. Interest payouts (coupon funds) could also be month-to-month, quarterly or half-yearly, relying on the bond. Coupon charges (rates of interest) largely depend upon credit score scores. To minimise market danger, select bonds with maturity dates aligning intently with that of economic targets.
Invest in fairness mutual funds
Equities have normally outperformed inflation and fixed-income devices by a large margin over the long run. This makes equities the best asset class for wealth creation over long run. If you have already got an sufficient corpus put aside for short-term wants, take into account investing surplus bonus in equities, ideally in fairness mutual funds for long-term monetary targets. Use systematic funding plans as it should guarantee rupee-cost averaging throughout market corrections and thereby, prevent from the trouble of market timing.
(The author is CEO of Paisabazaar)
Published – October 06, 2025 06:17 am IST
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