Seema hadn't touched her rainy day fund in 15 years. Would it still be up to the job if she needed it?

Fifteen years ago, Seema had a bit of a windfall. She decided that she wouldn't spend it but would keep it 'just in case' something cropped up in the future. She hasn't bothered to add to it over the years.

Seema's always felt her fund gives her absolute security. She never checks it, but feels happy knowing that it's there. But recently, her husband has been trying to persuade her to look at it again.
 
So she does. And at first, she's rather impressed by the interest that she's earned – all that extra money and she hasn't had to do anything for it! But her husband points out that that she's not seeing the whole picture.

The problem is, her savings bank account earns a very low level of interest. Her money just hasn't grown very significantly in the past fifteen years. If she'd put it in other savings schemes available in the market, then she'd have done far better – and all still for minimal effort.
 
There's something else that both of them are forgetting. That's the effect of inflation. Inflation – and, correspondingly, prices – have increased over the past fifteen years, by more than the interest rate that Seema's been getting on her savings.

So, just as Rs.1 today won't buy as much as a Rs.1 fifteen years ago, her rainy day fund just won't give her as much support today as if she'd called on it fifteen years ago.

Seema needs to put her fund in a higher-earning account and to keep an eye on it to make sure that the rate she's getting is competitive. And to help counter the effect of inflation, she should think about adding a little bit more to her fund every now and then – after all, even small amounts will make a difference.