17/02/2023
Dirty Picture - An education on Bank Deposit Risk
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There was once a horrible man. He kept his wife locked up in a room. He believed she had no right to step out of the house. Everyday before leaving for work he would lock her up and would unlock the door only after he returned from work.
As luck would have it, there was a secret door in the room which was, over time, discovered by the wife.
Once she discovered this secret door, she would use it to step out of the house. Soon she found another man and fell deeply in love with him.
They started courting each other. Sometimes she would step out to see him and sometimes he would step in to see her. They had a jolly good time while the husband believed his wife was all locked up.
Many years passed and gradually as he started ageing the husband became kinder. Finally one day he felt love for his wife and decided to set her free and embrace her.
He unlocked the door and embraced her. However he realised that now she was no longer the beauty he had married but had turned into an old hag. The husband looked at her and could only reminisce about her youthful beauty.
NOW THE CONNECTION OF THIS STORY TO PERSONAL FINANCE
When you invest in a Fixed Deposit, you lock your money in the bank thinking it to be safe there.
But the fact is the bank in turn may lend your money to an extravagant person (someone like Nirav Modi who spends your money goes insolvent and declares himself incapable of returning the loan.
And after many years when you unlock the bank in search of your wealth, what you get is nothing better than the old hag because the value of your fixed deposit is hardly enough to take care of your expenses.
It has been others who have enjoyed your money to meet their extravagant needs and reduce the value of your money by their defaults.
(When a section of society defaults, the country has to recapitalise the banks and to that extent print currency which in turn causes inflation and brings down the value of your money)
This is the reason, the fixed income we get by way of investing in Fixed Deposit is nothing but 'risk' shrouded in a false skin known as 'safe'.....
Collected!!
