"Where should I put my money?" "Is SIP safe?" "How long to save ₹5 lakh?" These are the questions that come up when you actually start saving — after you've decided to save at all. Here are the answers.
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Simple interest is calculated only on the original amount. Compound interest is calculated on the original amount PLUS previously earned interest. ₹1,00,000 at 10% for 10 years: simple = ₹2,00,000, compound = ₹2,70,704. The ₹70,704 difference comes from earning interest on interest. All savings instruments and SIPs use compound interest.
Savings accounts: quarterly (4 times/year). FDs: quarterly. PPF: yearly. Mutual funds: daily (NAV changes daily). More frequent compounding = slightly higher returns. ₹1L at 10% compounded annually = ₹1,10,000. Compounded monthly = ₹1,10,471. The difference grows over time.
Divide 72 by the interest rate to estimate how many years it takes to double your money. At 7%: 72 ÷ 7 = 10.3 years. At 12%: 72 ÷ 12 = 6 years. At 4%: 72 ÷ 4 = 18 years. This is a quick mental check — the exact formula uses natural logarithms, but 72 is close enough for planning.
Inflation reduces purchasing power. If your savings earn 4% and inflation is 6%, your real return is -2% — you're losing money in real terms. Always compare returns to inflation. FD at 7% with 5% inflation = 2% real return. Equity SIP at 12% with 5% inflation = 7% real return. This is why keeping all money in savings accounts is a losing strategy over time.
Use the [Savings Calculator](/savings-calculator) — enter goal amount, monthly deposit, and expected return rate. For manual calculation without interest: Time = Goal ÷ Monthly Deposit. With compound interest, the formula is complex (involves logarithms) — the calculator handles it instantly.
Save what you can each month — SIPs allow variable amounts. Some months you save ₹5,000, others ₹2,000. The average matters more than consistency. If your average monthly saving is ₹3,500, that's what you plan around. The [Savings Calculator](/savings-calculator) lets you model different monthly amounts.
Build a 1-month emergency fund first (in savings account), then start investing simultaneously with building the full emergency fund. Don't wait until the emergency fund is complete — every month of delay costs you in lost compounding. Split: 50% to emergency fund, 50% to SIP until emergency fund is complete.
Focus on one goal at a time for fastest progress. Stack goals sequentially: emergency fund → short-term goal → long-term goal. If you split ₹5,000/month across 3 goals, each progresses slowly. If you put all ₹5,000 toward one goal, you hit it faster and move to the next. Exception: always maintain the emergency fund while pursuing other goals.
Equity SIPs carry market risk — your investment can go down in the short term. Over 3+ years, the probability of loss drops significantly (historical data shows positive returns in 85%+ of 3-year periods). For students: use equity SIPs only for goals 3+ years away. For shorter goals, use FDs or liquid funds where capital is protected.
If you're in a SIP, a market crash means your monthly installment buys MORE units at a LOWER price. When the market recovers, those extra units generate higher returns. This is rupee cost averaging — it turns market crashes into buying opportunities. The danger is stopping your SIP during a crash — that locks in losses. Continue the SIP and you'll benefit from the recovery.
Start with a Nifty 50 index fund — it tracks India's top 50 companies, has low fees (0.1-0.3% expense ratio), and requires zero research. Examples: UTI Nifty 50, HDFC Index Fund Nifty 50, SBI Nifty 50. Avoid sector-specific funds and small-cap funds until you have 2+ years of investing experience.
For open-ended mutual funds (most SIPs), yes — you can redeem anytime. The amount you receive is the current NAV × units held. There may be: exit load (1% if redeemed within 1 year for equity funds), capital gains tax (15% short-term for equity held < 1 year, 10% long-term above ₹1L gain). No lock-in for most funds — PPF and ELSS are exceptions with lock-in periods.
Use the [Savings Calculator](/savings-calculator) — enter monthly SIP amount, expected return rate, and duration. It shows total invested, estimated returns, and final value. For existing SIPs, check your fund statement or platform dashboard for XIRR (annualized return) which accounts for the timing of each installment.