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Opportunity Cost
Opportunity cost is what you sacrifice when you choose one option over another. The cost of keeping money in a savings account is the higher return it could have earned elsewhere; the cost of a gap year is the income and progress forgone.
Why It Matters
Every financial decision is really a choice between alternatives, even when one of them is doing nothing.
In India
Keeping ₹1 lakh in a savings account at 3% instead of a fixed deposit at 6.5% has an opportunity cost of about ₹3,500 a year.
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