Both short and long-term investment tools are vital for financial planning. However, for senior citizens, short-term investments could be the only income source for recurrent expenses such as grocery, phone and power bills, as by then, they may have already achieved most of their long-term goals like owning a house, children’s education, marriage, which requires large money, etc.

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Short-term investment tools offer liquidity, ensuring your short-term needs are fulfilled. Invest in short-term instruments if your goals have a timeframe of one year or less. At the same time, aligning your investments with specific goals is vital to ensure liquidity and capital preservation.

Here are six avenues to invest money for short-term needs.

Fixed Deposits: 

Bank fixed deposits (FDs) offer investment avenues for as short as seven days to up to 10 years. FDs provide higher interest rates than an ordinary savings account. Banks typically adjust their rates based on the Reserve Bank of India’s (RBI) repo rates. FDs are highly liquid, and one can break them prematurely for a penalty during emergencies. However, income from an FD is taxable. Additionally, the Deposit Insurance and Credit Guarantee Corporation (DICGC) protects a customer’s FD investments up to Rs 5 lakh in a particular bank.

Recurring Deposits:

Bank recurring deposits provide investors more flexibility, as they can invest the amount in instalments. Except for this feature, recurring deposits are the same as FDs in terms of interest rates, taxation, etc. RDs have a minimum investment period of six months. Most banks also allow premature withdrawals. So, RDs are as liquid as FDs for short-term investors.

Post Office Time Deposits: 

Post office time deposits are FDs with tenures of one year to five years. They also allow premature withdrawals. The interest rate is higher than a savings account, which is currently 6.9 and 7.5 per cent for a year and five years, respectively. As per the India Post website, if exited after six months but before a year, the PO savings account interest rate will apply. These FDs can be renewed on maturity, and the interest income is taxable.

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Corporate Fixed Deposits:

Companies issue FDs for their fund requirement. These are less secure than the post office or bank fixed deposits, but they offer higher rates than them. One should invest in them only after checking their credit ratings and other factors. Agencies like CRISIL and ICRA provide credit ratings to these FDs. Corporate FDs are liquid and can be considered for the short term.

Treasury Securities:

Treasury securities are of two types: Treasury bills for less than a year and Treasury bonds for more than a year. One can invest in Treasury bills for guaranteed returns in the short term as these are government-backed. Treasury bills are 100 per cent secure and come in different tenures: 14 days, 91 days, 182 days, and 364 days. One can buy them via the RBI Retail Direct portal or through brokers. Gains from T-Bills are taxed as per the individual’s tax slab.

Debt Mutual Fund:

 Debt mutual funds, such as overnight funds, liquid funds, ultra-short duration funds, and money market funds, have a duration of one day to one year. So, one can also explore these funds for short-term needs.