If you have managed to save a lakh, through the years, congratulations from us! 

You seem to be good at saving. But now you might be wondering what to do with that money lying in your RD or bank account? Should you just let it stay there or do something better with it?

Ask yourself these 3 important questions, before you take a decision about your lakh:

#1. Do you have enough money to last you for a few months of no income?

If you don’t, it would be a good idea to let the money stay in the RD or if it is in a savings bank account, move it to a FD or even better, a debt fund. This money can act as a cushion for uncertain times as your personal emergency fund.

If you already have an emergency fund, congratulations again! You are quite ahead of your peers when it comes to financial thinking. Now you can move on to the next question.

#2. Do you have any plans for a big spend in the coming 1-5 years? Have you planned your savings for the same?

If you have an emergency fund but haven’t planned your savings or saved for a big purchase in the foreseeable future, such as foreign vacation, then use this money for planning the same.  Simply place the money in a debt fund till the expense comes up. Your money will keep growing at a steady rate and you will also end up with a little extra.

In case you, have an emergency fund and have planned your savings for a big ticket purchase then, we salute you! You surpass your peers by miles and you are now eligible to move to the third question.

#3. Have you planned for the distant future? Are you saving up for your long-term goals?

We know the distant future, say 20-30 years from now, is very difficult to predict or save up for. Nevertheless, if your emergency and short-term needs are already catered for, then it’s a great idea to put your extra one lakh rupees towards for the long term.

For this, invest the lakh in a good equity mutual fund and let it grow for seven years or longer. That one lakh can become a much bigger sum, by the time you retire.

If you are the kind of person, who has taken care of their emergency fund, expenses that are coming up in the next five years and is also saving and investing for retirement then you are way ahead of the curve! Our heartiest congratulations on being on top of your personal finance game and you are probably going to end up very comfortable, not to mention wealthy!

As to what to do with the lakh? Well, do whatever you want, you have earned the right to do so!