Gold, being the number 1 priority savings instrument for the Indian masses, now has schemes that are centred on enabling people to own it more easily. Jewellers have designed “gold saving schemes” which are supposed to help people save up a sizeable chunk of funds, which they can then spend on gold jewellery.
How it works is that you regularly invest a set amount of money every month, for a predetermined period of 1 or 2 years, and the jeweller covers one bonus instalment towards the end. At the end of your deposit tenure, you can use all these saved up funds to purchase gold jewellery.
Let’s break it down.
- Non-transferable investment.
You invest a fixed amount each month for a fixed period of time and towards a fixed goal – you can do this with other instruments like recurring deposits, etc. for a better return on investment and more flexibility. Money invested towards a gold saving scheme can only be used for purchasing a very limited range of gold jewellery from a specific seller. If you were to invest the same way, at the same rate in a recurring deposit, you would have the same (or more) amount of money to spend at the jeweller of your choice, on the design of your choice – or if you’ve changed your mind by then you can go buy a motorbike or something.
- It’s a regular money saving scheme.
The scheme’s marketing makes it seem like you’re buying gold every month, when in reality, you’re just setting aside a certain sum every month in order to buy gold at a later date. It’s a simple matter of keeping money aside every month. You can do this with a piggy bank in your house, or invest in a recurring deposit scheme or a savings bank account and earn some interest. The only difference is that the bonus instalment your jeweller gives you at the end of the scheme gives you a 8-10% return on your total investment.
- Specific purpose directed investment.
The monthly instalments you make are directed towards purchasing gold jewellery. If you change your mind halfway through and wish to purchase gold bars, coins or bullion, you’re in for a disappointing conversation with the jeweller. You can only select jewellery from a specific range, as decided by the jeweller. You can’t buy any jewellery you want, and your personal choice and taste does not matter at the end of the day. The jeweller decides what gold jewellery you buy. If you want to use the saved up funds to purchase a set or piece of jewellery apart from the pre-decided plan-specific range, you will have to pay additional making charges which effectively means that your 8-10% return on investment is useless.
- Jewellers use these schemes to guarantee future sales.
By making you invest your hard earned money every month towards their own jewellery store, gold jewellers effectively ensure that customer come back and buy from them at a future date. Not only that, once you take a gold savings scheme from a particular jeweller, you have no choice but to purchase jewellery from that jeweller only. You can’t transfer your savings or withdraw them for their cash value.
The gold rate from when you start investing and when you’re able to use your investment will not be the same. And the rate at which you will have to purchase the gold is the rate at the end of the investment tenure, not the rate as on the date you started investing. Bear in mind that the gold rate will, on an average, be higher than it was the previous year and you will have to spend at that rate, regardless of whether you want to wait for a few days for a small dip in gold prices.
What does the jeweller do with your monthly investment?
Well, the jeweller offering you the scheme can do literally whatever he wants with your money, including taking it and investing in a recurring deposit scheme and earning a decent profit. There is no real gold getting credited to your account, no real monetary gain you’re making. The jeweller is simply ensuring that you come back and buy from his store at the end of the tenure, and sweetens the deal by giving you one month’s investment (or some other benefit, which is easy for him to do now that he has made a decent profit off your investments).
When do gold saving schemes work?
Gold savings schemes make sense for those few select people who have planned a wedding a couple of years down the line and have not heard of any other investment or savings instrument apart from a gold saving scheme.
Investing regularly in any investment vehicle that offers you decent returns will have the same result as a gold savings scheme in terms of how much money you’ll have at the end of the tenure to buy gold – with the added advantage of flexibility in where you spend that money.
One good time to invest in such a plan, however, is if you know the jeweller well, and trust his designs, and have a wedding planned for a year or two from now. It becomes easier to save through these schemes if you know that you’re getting exactly what you want at the end of the scheme.
Here’s a list of popular gold saving schemes in the market right now:
- “Jewels for less” by PC Jewellers.
- “Shagun” by Gitanjali Jewellers.
- “Gold Tree” by GRT Jewellers.
- “Gold Harvest” by Tanishq.
- “Jos Alukkas Gold Saving Scheme” by Jos Alukkas.
- “Gold Schemes” by Bhima Gold.
- “Kalpvruksha” by Tribhuvandas Bhimji Zaveri.