There are times when individuals have extra cash in hand. This can be because they received a bonus, any sudden income or gain, etc. People may not always prefer to invest in them for a long time and wish to keep them accessible for emergencies or just for daily use. But do you know you can still generate returns on them while still keeping them accessible?
This article will help you learn about investment options that have high liquidity, along with generating decent returns.
1. Savings accounts with high interest rates
One of the easiest and safest ways to keep extra cash is in a high-interest savings account. It gives instant access via ATMs, internet banking, or UPI and has higher interest rates than a standard savings account.
Key Features:
- Provided by banks, minimal finance, or internet banks
- Most banks offer interest rates between 2.5% and 3.5%, though some small finance and private banks may offer up to 6–7% for higher balances.
- Quick access to money at any time
- No withdrawal penalties or lock-in
Pros:
- Very safe and liquid
- Interest is consistently credited.
- Simple to open and maintain
Cons:
- Earned interest is subject to taxes.
- It might be necessary to keep a minimum balance.
- Rates are subject to change at any time.
2. Mutual funds that are liquid
Short-term debt funds are also known as liquid mutual funds as they are highly accessible. They provide higher returns than a conventional savings account and are perfect for holding excess funds for a few days to months.
Key Features:
- Redemption is feasible in T+1 days.
- No exit load after seven days
- Returns typically range from 3.5% to 6%, though they can be lower depending on the partner bank or investment product.
Pros:
- Better returns than savings accounts
- Safe and appropriate for temporary requirements
- Freedom to leave at any time, as no fees are charged after 7 days
Cons:
- There is no guarantee of returns.
- A little difficult for beginners to understand
3. Fixed Deposit Sweep-in
The best features of fixed deposits and savings accounts are combined in sweep-in FDs. The excess amount is automatically transferred into an FD when your account balance surpasses a predetermined threshold. It automatically returns to your account if you need money.
Key Features:
- Automatic transfer of excess to FD
- Interest rates are similar to regular FDs, usually between 5.5% and 7%, depending on the bank and tenure.
- Associated with your savings account
- Quick access to money when it’s needed
Pros:
- Greater returns on unused capital
- Fully liquid for withdrawals
- No need for tedious tracking
Cons:
- There must be a minimum threshold
- Not accessible at every bank
- May contain intricate terms and conditions.
4. RDs, or recurring deposits
Like a fixed deposit, an RD allows you to earn interest while saving consistently. A set amount is invested each month for a predetermined amount of time, and the interest is compounded quarterly.
Key Features:
- Consistent monthly investment commitment
- Duration is six months to ten years
- 6% to 7% interest
- Possible early withdrawal with a fee
Pros:
- Promotes saving while maintaining liquidity
- Consistent returns
- Bank-backed and secure
Cons:
- Fixed amount of contribution
- Early withdrawal penalty
- Unsuitable for substantial lump-sum deposits
5. Money Market Accounts (through Neo-banks)
Money market accounts, which are hybrid products offered by fintechs and neo-banks, combine the security of savings accounts with higher returns through pooled bank deposits or underlying debt funds.
Key features:
- Include instant access via apps.
- Range of returns is 4%–6%
- frequently includes automation and clever saving tools.
- There is typically no lock-in
Pros:
- Higher returns than those of simple savings accounts
- Interfaces that are digital, simple, and intuitive
- Some provide cashback or reward points.
Cons:
- Not all banks are subject to RBI regulation.
- Returns are not fixed and can vary.
- Limited in-person customer service
6. Government Securities with Short-Term Maturity
These include short-duration government bonds and Treasury Bills (T-Bills), which are extremely safe and appropriate for putting money aside that you won’t need for three to twelve months.
Key Features:
- Accessible via RBI Retail Direct
- Maturity takes 182, 364, or 91 days
- Range of returns is around 6%–7%
- Released by the Indian government
Pros:
- Sovereign guarantee, or zero credit risk
- Predictability of returns and fixed maturity
- Ideal for cautious investors
Cons:
- Requires setting up a demat account with the RBI.
- Less well-known and somewhat difficult for beginners
7. Gold Digital
Investing in 24K pure gold online without the need for physical storage is made possible by digital gold. It’s a contemporary, secure method of storing funds in a physical asset with immediate liquidity.
Key features:
- Purchase or sell for as little as Rs. 1.
- Safely kept in insured vaults
- If necessary, it can be transformed into actual gold.
- Prices based on current gold rates
Pros:
- Protect against inflation
- Simple to use through apps (e.g., PhonePe, Groww, Paytm)
- No trouble with storage
Cons:
- No passive return or interest
- Taxed as physical gold
- Minimal fees for purchasing, selling, and storing
Comparison Table
| Option | Liquidity | Safety | Return Range (p.a.) |
| High-Interest Savings Account | Very High (24/7) | Very High (Bank-backed) | 3% – 7% |
| Liquid Mutual Funds | High (T+1 day) | High (Low-risk debt) | 5% – 6% |
| Sweep-in Fixed Deposits | Very High (auto) | Very High (Bank-backed) | 6% – 7% |
| Recurring Deposits (RDs) | Medium (fixed term) | Very High (Bank-backed) | 6% – 7% |
| Money Market Accounts | Very High (App-based) | Moderate to High | 4% – 6% |
| Short-Term Govt. Securities | Medium (91–364 days) | Highest (Sovereign) | 6% – 7% |
| Digital Gold | High (24/7 online) | Moderate (Platform-based) | Varies with gold prices |
Bottomline
The conclusion can be drawn that keeping idle money in a home and a bank account will not yield any returns. In the long run, the purchasing power may also be reduced due to inflation. However, investing them wisely can give you returns along with maintaining the liquidity. Investment options like high-interest savings accounts, digital gold, government securities with short maturity periods, etc., are a good and secure way of using idle money.
It is always advised to conduct personal research on the chosen option to understand the terms and conditions before making a final decision.