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5 Long Term Investment Options that can Help Meet Short-term Money Needs

When you have surplus money to create wealth, you have several options for investment. Your investment plan should take care of short-term requirements also, even if you consider a long-term horizon of investment to generate higher interest income.

Addressing Short-term Needs

After one or two years of investment, or earlier, you may require funds urgently to address unforeseen needs. If your cash inflow is affected due to reasons like loss of job or delay in payments from the customer, we might not be able to facilitate funds during emergencies. During such events, we should explore our existing investments that can come to our rescue at much lesser cost and time.
Let's explore five most convenient long-term investment options we all have: Public Provident Fund (PPF), EPF, Fixed Deposit, Senior Citizen Saving Scheme and Insurance Policy.

Public Provident Fund (PPF):

Public Provident Fund(PPF) is a type of deposit that you create with government over a period of 15 years or more. Rules associated with Public Provident Fund are generally considered complicated, however, it offers long-term returns and restricts avoidable expenditure.
When you invest in PPF, you should remember that your year-counter always starts on 1st April post your first investment, and not the date on which you opened the account.

Given below are some rules for withdrawals and loans from your PPF account:
  • Withdrawal is allowed only from seventh year and loan is permitted only between third and sixth years.
  • Withdrawal is limited to 50% of minimum balance maintained by you in the last four years, while loan is limited to 25% of minimum balance maintained in previous two years.
  • Premature closure is possible only after five years and that also in case of medical emergencies or children’s higher education.

Recommendation: Make sure you consider whether you have other investment options available with you. You can use an FD Calculator to check the future value of your PPF account if you don't withdraw funds from it.

Employee Provident Fund (EPF)

Employee Provident Fund is the deposit made out of deduction from salary and contribution from employer, thus creating a retirement fund.
EPF allows withdrawals only in exceptional cases like buying a home, medical treatment, marriage and likewise. In each case, the amount is limited by various rules, and in most cases, it is subjected to completion of five-years subscription in EPF.

Senior Citizen Saving Scheme

Senior Citizen Saving Scheme is a lumpsum deposit made by individuals of 60 years or above, to generate regular income. Anytime after one year, only premature closure is allowed. There are no available provisions for partial withdrawal or loan in this scheme.

Fixed Deposits

Fixed Deposits can also be a sound investment option to meet your short-term money needs. If you want money only for a short period, overdraft against FD is better options. Make sure that you check current FD interest rates and previous rates to decide opportunity cost. Nowadays, quality financial institutions provide Fixed deposit with several investment options and flexibility keeping in mind of long-term and short-term objectives.

Endowment Insurance Policies

Endowment Insurance policies are meant to avail lumpsum amount after a long period of ten years or above. When a minimum of three premiums are paid, it can come to your rescue during emergencies.

Our Recommendation

Your decision to withdraw money depends on the purpose of your withdrawal and amount you need to cover your short-term need. While you make an investment plan, consider checking options given by financial institutions to avail more flexibility for your future needs. You should make sure to consider the age of your investment, an amount required, repayment plan, penal interest and current FD interest rates to make a final decision. 

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