Grow our savings for a better future can only serve our purpose in the long run. Because it has the power to beat inflation. Moreover, it contributes a few times more than our savings amount.
Grow Savings for our Better future.
Indeed, we all remember the age-old saying that a rupee saved is as good as a rupee earned. We have to know this to successfully implement the importance of savings in our life.
In the first place let me clarify what I mean to say.
We have started our income/job at the age of twenty-five (25) years. We will retire at the age of sixty (60) years. Our income life is (60-25) years i.e. thirty-five (35) years. Therefore, we have to generate a retirement fund. Now we have to guess how much money we will require at the time of our retirement.
Thereafter, think that our family is of 5members- myself, my husband and two children and living father or mother. In the first place, presently our family’s monthly expenditure is Rs.10000. After 35 years i.e. after our retirement there is every likelihood that to maintain a family of the same size we will require around rupees two lakhs (2,00,000/-) p.m.
Actually, it is very hard to believe, but take it for granted that in thirty-five (35) years of span expenditure will easily go up fifteen to twenty (15-20) times.
Most importantly to meet that requirement, we need to create a fund of Rs. 3,00,00,000—assuming an 8% rate of interest prevailing at that time for senior citizen.If we grow our savings properly then we will get around Rs. 2,00,000p.m.
Actually, we may need even more as we have to beat the inflation rate also which is at present around 7-8% in India.
If we somehow manage our retirement fund, it will at the same time strongly support the need for sound and sufficient sleep.
Besides, we may need even more if the rate of interest goes down at that time.
Suppose, we are saving as high as rupees ten thousand (10,000/-) per month. Then we will save rupees one lakh and twenty thousand (1,20,000/-) only per year.
As a matter of fact, in next thirty-five (35) years, if we can maintain these average savings, then it will aggregate to only rupees forty-two lakhs (42,00,000/-).
Most importantly, try to think that our requirement is rupees three crores (3,00,00,000/-). Nevertheless, we are able to save forty-two lakhs (42,00,000/-) which is only around fifteen per cent (15%) of our target.
As a matter of fact, here is the power to grow our savings in the long term. If we can invest properly and judicially, then our savings can easily grow at least eight to ten (8-10) times in the next thirty-five (35) years. Not to mention, this will save us from stress.
Additionally, if we take the help of a fund manager or financial adviser, there is every possibility that this amount grows even more.
To tell the truth, if our savings do not grow then we will not be able to create such a huge fund. Therefore, we need to invest in our fund. Either in mutual funds or in real estate.
General Norms of Savings:
We should start our savings and investing them as early as possible in our life and preferably just after attaining the age of 18 years or so.
Most importantly the Internet is providing us with various avenues to earn and earn a lot if you want from home.
Most importantly at an early age when we are alone, our family generally does not depend on us. Therefore, we can easily save 70-80% of our earnings and we have to save for our financial betterment in future life. Remember this is the best time to save and invest.
Importance and benefits of life insurance policies may be very helpful.
We have to choose the right investment plans from now and continue them. We also have to judge them after every 4-5 years and whenever the prevailing rate of interest/inflation changes.
Furthermore, we shall try to create a good fund before our marriage. Initially, we will try to save the total interest at this time so that our money can grow more quickly.
Remember one thing that drops of water can make an ocean one day. Therefore, our minimum savings, if invested properly and judicially one day it may be a huge amount.
Various Savings Methods to grow savings:
First of all, we must clear that these process will increase not only the importance of self-esteem but also love and relation in our families.
There are various savings and investment policies in the market. We have to choose from them.
1) Savings Account:
We can open it with a bank or post-office. In this account, we can save any amount, any time. There is no limitation what so ever. Generally, bank issue a debit card and cheque book when we open the account.
We have to maintain a minimum monthly or quarterly balance which differs from bank to bank. Hon’ble Prime Minister of India has announced for the zero-balance account.
Net-work of branches of various banks and post-offices are perhaps spread out in every corner of India. Still, a huge number of the Indian population has no savings account.
2) Recurring and Fixed Deposits:
To fulfil short or midterm targets of savings we generally prefer Recurring and Fixed deposits. They are very safe and useful and available in all banks and post offices.
Most importantly their interest rate differs and varies from time to time. If we have exact knowledge, then we can generate the maximum return.
Generally, we save a fixed amount per month here for a specific year that is called terms. Normally it is for12-60 months and we have to continue for the stipulated term. Otherwise, we will be penalized.
We save a lump sum amount at a time. Sometimes banks offer some extra benefits on FDs as they invest it in some other schemes.
Moreover, if we for any reason want to close and withdraw amount we have to pay some penalty.
Therefore, choose RDs and FDs cautiously.
3) Post Office Savings Schemes
Just like banks they provide recurring deposit and various fixed deposit-i) National Savings Certificate (NSC); ii) National Savings Scheme (NSS) and etc.
Furthermore, we can grow our savings to get the income tax benefit.
4) Company Fixed Deposits
Indeed, reputed companies sometimes raise fund through company FDs or Corporate bonds and they normally provide a better rate of interest than bank FDs. Therefore, it is also a very popular and safe option among investors.
Remember, it is for a few years and there is a lock-in period and we cannot withdraw before that time.
5) Government Bonds:
Various government organizations sometimes take public deposit directly like company fixed deposit above and both are more or less same.
Though the return is not so attractive, still it is a very good investment, particularly in the long run. Because it not only gives protection against loss but also gives income tax benefit against Life insurance and Health insurance.
And it is one of the roles of parents in child development.
Car insurance is a must for all car holders.
Moreover, Health insurance is gaining speed because indoor treatment is very costly in India. If you have enough coverage for your entire family, then you just pay the premium within the time and stay relaxed.
Most important and popular is Life insurance which protects family income even if the earning member dies in early age. These will help to grow savings to protect our family.
Home insurance, fire insurance and other insurances though not very popular but may be very helpful at times. So it will be better if we think of it.
7) Mutual Funds
Actually, there are a lot of funds available for investment. We invest money in some funds. The fund manager or portfolio manager invest our money in stocks and bonds and other types of investment. They are generally “open-ended”. It means that new investors can start at any time.
Investors are allotted some units which are purchased according to the prevailing market price. This price goes up or down.
There are a lot of mutual funds who are specialized in investing in various countries and businesses, and investment styles. Some funds even invest in other funds.
Because of low investment cost and managed by specialized managers and being a flexible mode of investments and liquidity and above all variety of products, investment in mutual funds is now number 1 choice for both long term and midterm investments.
8) Unit-Linked Insurance Plans (ULIP)
Furthermore, insurance companies offer ULIP which is a combination of insurance and investment like mutual funds.
If properly chosen, they can provide a better return than the insurance policy.
If you have proper knowledge about the market, then it is the best option to grow our savings amount. But the risk is involved and if you are not aware of market movement then you will surely lose or come down to zero.
Someone prefers to invest in well-known companies and holds them for a very long time or for a lifetime.
Whatever you do you need knowledge.
Gold bonds are also a very good way of savings. These are a substitute for physical holding. Reserve Bank of India on behalf of Government of India issues these bonds.
Most importantly, it may seem very easy, but to continue this we need an all-important and a strong positive attitude.
Mind one thing that only our savings can stand beside us in crisis. It can generate income or profit without our participation. So it also gives us earnings after our retirement or even after death to our family members.