Gold saving schemes are widely offered by major jewellery brands in Kerala. These plans allow customers to pay a fixed monthly installment for a set period (typically 11 months) and redeem the accumulated amount for jewellery at the end of the term. We evaluate the financial benefits and risks of these programs.
How Gold Saving Schemes Work
Most schemes follow a structured format: - Installment Phase: You pay a fixed amount (e.g., ₹5,000) every month for 11 months. - Redemption Phase: In the 12th month, you purchase jewellery equal to the total accumulated value. - The Incentive: Jewellers incentivize these schemes by offering to waive making charges (Panikooli) up to a certain percentage (often 10% to 18%) or by contributing the final month's installment.
Types of Saving Schemes
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1. Value-Based Schemes Your contributions are recorded in Rupee terms. At redemption, the total cash value is used to buy jewellery at the prevailing market rate on that day. - Risk: If gold rates rise during the 11 months, you will purchase less gold weight with your accumulated savings.
2. Gold Weight-Accumulation Schemes Each monthly installment is immediately converted into gold weight based on the rate on the day of payment. For example, if you pay ₹5,000 on a day when the rate is ₹5,000/g, you accumulate 1.0 gram of gold. - Benefit: This option helps hedge against rising prices, as you accumulate weight monthly regardless of rate movements.
Evaluation: Are They Worth It?
The Advantages - Forced Savings: Helpful for families planning a wedding purchase over a set timeframe. - Reduced Making Charges: Waiving making charges can result in savings, especially for intricate ornaments that carry higher craftsmanship fees.
The Disadvantages - Restricted Redemption: You must redeem the value at the specific jeweller's showrooms, limiting your options. - No Cash Refunds: These schemes do not permit cash refunds; you must take physical ornaments or coins. - Rate Risk: Value-based schemes expose you to rate increases.
Key Considerations Before Enrolling
- Choose Weight-Based Accumulation: If your goal is to buy gold ornaments, a weight-based scheme is generally preferable as it reduces rate risk.
- Verify the Terms: Confirm what happens if you miss an installment or need to exit the scheme early.
- Assess Jeweller Credibility: Ensure you choose established, registered jewellers, as these schemes are unsecured advances.
- Track Daily Rates: Monitor rate trends on RateTracker.in to evaluate if enrolling in a scheme aligns with your buying timeline.
