Financial planner Dilip Samant underlined the importance of savings and talked about investment options and how to pick the right ones, at a Moneylife Foundation workshop

"It's not how much you earn that is important, but what matters is how much you save and for how long," Dilip Samant, Mumbai-based columnist and financial planner with Golden Investments, said today.

"You spend around 200-250 hours a month to earn money, but your spending continues for more than 720 hours every month," he said. Therefore, "saving is important, to strike a balance."

Mr Samant was addressing the first seminar conducted in Marathi by Moneylife Foundation on financial literacy. To underline the importance of saving, he described the case of Chandulal Shah, founder of Mumbai's Ranjeet Studio, who despite being rich and a millionaire at one time, ended up on road side mainly because of a careless attitude with regard to his earnings and practically zero savings.

He elaborated on the basics of understanding the financial circle, from bank accounts and transactions, various types of insurance, loans, to savings and investments, emphasising a right and timely approach and the need for due diligence before buying financial products.

He also described various investment options like fixed deposits, mutual funds, equities, gold and silver, as well as real estate, as the way to provide for future needs.

Mr Samant explained the documentation required to open a bank account, the types of bank accounts, advantages and disadvantages, interest rates, income-tax rules, penalties and the security of funds with banks. He also talked about credit and debit cards and cautioned people to be careful with the ATM PINs.

He discussed various investment platforms such as banks, cooperative societies and even bhishi (chit fund schemes).

Mr Samant also dwelt on home loans and education loans, and how to go about getting the loan from a bank. He assessed and explained the pros and cons of investment in real estate, and elaborated on investing in a new house, newly built property and housing under construction. "Always carefully assess the monthly EMI and read the loan document in detail," Mr Samant advised the participants.

On insurance, he explained the different types of policies-life, education and health insurance-and how to select the right policy. "The attitude of insurance as an investment is a wrong approach. One should have a policy just to take care of future uncertainties," he said.

Mr Samant said it was very important to know when, where and how to invest and he gave an in-depth presentation with examples ranging from fixed deposits to gold and the risks and advantages associated with these. "Make your money work for you. Just keeping money is not an option; but investing it rightly is the wise thing to do," he said.

Focusing on the returns on investment, he compared various options in the context of the impact of inflation. "Historically, the returns on fixed deposits are negative due to inflation. The real interest on fixed deposits erodes due to the price rise factor," Mr Samant said. He supported his argument with detailed figures of investment and returns over various time periods.

He examined multiple options like jewellery, gold exchange-traded funds, gold savings funds and e-gold/silver. He also discussed equities, mutual funds and systematic investment plans, again with examples that made it easier to understand.

One of the participants raised the issue about multi-level marketing schemes that promised double returns and gave such returns initially. Responding to the participant's question about how investors could guard against being lured by such investment proposals, Mr Samant said, "Any scheme promising such huge returns and not under the scanner of any regulator such as the Reserve Bank of India and the Securities and Exchange Board of India, should be avoided."

On the issue of MLMs, Yogesh Sapkale, deputy editor of Moneylife magazine, also warned against investing in these schemes. "Savings bank deposits give about 4% interest, fixed deposits close to 9% and Employees Provident Fund about 10%. So anything that promises returns more than 10% and seeks to get a large number of people to invest, should be strictly avoided," Mr Sapkale said. He mentioned that the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, was helpful in dealing with such schemes.