Allocate to direct plan of liquid fund, auto-sweep account

HDFC Bank has cut its savings account interest rate from 3 per cent to 2.75 per cent.

- SANJAY KUMAR SINGH & KARTHIK JEROME

HDFC Bank has cut its savings account interest rate from 3 per cent to 2.75 per cent. Several other large banks also offer interest below 3 per cent. Given such low returns, savers need to manage their short-term money more efficiently.

Maintain limited balance A savings account offers convenience. "Premature withdrawal from fixed deposits (FDs) or redemptions from mutual funds can be avoided," says Avinash Luthria, Securities and Exchange Board of India (Sebi)-registered investment advisor and founder, Fiduciaries.

One should not, however, keep too much money in these accounts. "They should be used mostly to keep running expenses and not as a savings instrument," says Abhishek Kumar, Sebi-registered investment advisor and founder, SahajMoney.com. He advises maintaining the minimum balance requirement, one month's expenses, and a buffer for emergencies.