Savings and its importance in life are immense.
Savings is one of the most important aspects of everyone’s life. We must save sufficiently so that we can lead a happy life.
Most importantly, here we will indicate our savings.
What do we mean by Savings and its importance in life?
In the first place to get the answer to this question, we will first know the definition and thereafter try to know its importance.
In the first place, savings are either unspent money from our income or deferred part or amount of our consumption
Savings refer to the unspent amount from our income.
In the banking sector, savings refer to our savings accounts. They are short-term and interest-bearing and lays with a bank (financial institutions).
We save, because, we can’t forecast the future and so our saving may protect us monetarily and will safeguard us in crisis.
We save to create
- Emergency fund– It may be anything like to build a new roof for our house, huge medical expenses, or unexpected loss of income, etc. We need to save money for these emergencies. It will help us to avoid falling into a vicious debt trap to overcome these crises in life.
- Retirement – (written above) If we intend to retire someday, we will probably need savings and/or investments to take the place of the income we will no longer get from our job.
- Expecting Long Life-People are now living longer and needing more money with the progress of medicine and public health.
- Social Security-Social Security was never intended to be the primary source of income and should be treated as a supplement to income.
- Education – Education charges are highly expensive, particularly private and technical education. It is increasing at a rapid speed every year. So it’s getting tougher to meet these expenses.
(Also read factual reasons to save money).
EXAMPLES OF SAVINGS:
We earn money and spend them for various reasons.
The first and foremost of them is day-to-day expenditure i.e. various fares, tiffin, daily necessary food item marketing, etc. We must remember, that we need to maintain healthy eating habits.
Secondly, we have some monthly fixed expenditures like house rent, electric bill payment, monthly grocery, shopping, etc. Added to these there are some more monthly recurring expenses like mobile recharge, tv recharge, tuition fees, the salary of servants, monthly entertainment, going to cinemas, parks, malls, restaurants, special meal or dinner, regular medicines, health insurance, child insurance etc.
Apart from these essential daily expenses, we have to do some recurring expenditures such as life insurance premium, tax of the house, doctor fees and medicines, various maintenance work, garments marketing, purchase of gifts to celebrate occasions or to attend invitation and party, yearly session charges, course fees and so on.
Additionally, we require money to celebrate various occasions and days along with enjoying some weekends with our love and relation.
TYPES OF SAVINGS:
We also have to expend to fulfil some purposes such as buy land/flat/house, purchase car and jewellery-gold/diamond, marriage of self/brother/sister/child, throw anniversary and birthday parties, travel and tour, major repair/colour and paint/addition and alteration/electrical wiring of our residence, may undergo expensive medical treatment (generally operation).
Moreover, we have to retire after a certain age. But life goes on and the expenditures also. So we have to make old-age provision.
BESIDES, WE HAVE TO BEAT THE EVIL OF INFLATION.
The inflation rate in India is between (7-8) % p.a. which is very high. According to world-famous, Nobel Prize winner economist Mr Amartya Sen, we have to expend 10 times more in every 20 years to maintain the same lifestyle.
If we analyze our expenses, we will see that savings are a very important aspect of our lives. Without savings, our life is worse than animals. However, we need to know how to grow our savings for a better future.
Our income should be saved to meet short-term (1-3 years); mid-term (3-7 years) and long term (more than 7 years) expenditures. The short term is those where money requires regularly in a span of a few months or years or may occur once in 3 years from now.
Mid-term are those which will/may come once or twice within the next 3-7 years.
To maintain short-term and mid-term purposes you have to save at least (30-50) % of your income.
To maintain long-term and mid-term purposes you have to save at least (20-30) % of your income.
The best theory is to write down all our purposes (short, middle and long) and then keep aside some money i.e. Save according to our income after keeping some money for day-to-day expenses.
If we earn daily/weekly/monthly save daily /weekly/monthly. But save first. We have to make a budget to distribute our income logically and judicially (not emotionally) among various purposes.
HOW MUCH CAN WE POTENTIALLY SAVE?
Our income may be gross or net. Gross is the total income. Net is that income which we get in hand after deducting taxes if any.
Net income is generally less than gross income and it, in other words, is our take-home income. We have to expend or save from this net income.
Our savings potentiality is our excess net income after our expenses.
ASK THESE QUESTIONS BEFORE START OF OUR SAVINGS:
- How can we reduce or delay or cancel our expenses?
- How can we eliminate and save our expenses?
- Is this savings sufficient for my future?
- Which is the best scheme to save and get maximum benefits?
Do not “think that to save money means to sacrifice the pleasure of life”. Our positive attitude will help us a great deal. If we think to protect interests of life, we must have to save our future first and for that we need savings and we have to save sufficiently to maintain our social position and relations and esteem.
TIPS FOR SAVING MONEY:
- Save bonus amount–Unforeseen money, such as income tax return.
- Save coins–Save all coins, returned, at the end of the day in your piggy bank (Lakshmi’s Ghat). Some save only 5 or 10 rupee coins and notes. When it is full, deposit in our savings accounts or buy a financial certificate or bond or pay the insurance premium, purchase a mutual fund, etc.
- Buy local brands–We may purchase local items of good quality, if possible directly from the manufacturer. Do this and we can save a lot of money.
- Save from our lunch Money-Make a habit of taking lunch/tiffin from home instead of taking it from outside
- Compare prices of items before buying – Compare prices of the same product. Purchase wherefrom we get the lowest priced item.
The Importance of it:
We have to consider various things as we are going to save for the future.
The main factors are to start to save as early and save as much as possible. We cannot control the rate of return, rate of interest, profit or loss, etc. But we can ensure -starting saving at the earliest and the maximum.
Early savings may be kept for more time. Interest, bonus, profit will be accrued for a longer period. The power of compound return will work in our favour for a longer period.
We need money if we want to buy a house/flat/land or build/repair/renovate. Save enough money for the purpose. It will be wise if we down pay the total amount instead of taking a loan from a bank or other financial institutes.
If we take a loan and repay in 7-8years, then we have to pay almost 2-3times more.
In India, the savings account rate is the lowest. Banks and post office term deposit is slightly more than savings. It varies from time to time, bank to bank or bank to post –office. Government bonds give a little more. Mutual funds return more if invested for 8-10 years or more. If we can invest in shares with proper knowledge and guidance, it pays the maximum.
Generally, we the people open a Savings Account in the bank to save our money. It is a must for all because of many reasons.
Let meet major life-changing goals –
- Retirement purpose.
- We may save money to purchase a flat or a car.
- To meet education expenses particularly higher or technical.
- It may be marriage also self or child or someone else in the family.
- We may need funds for tour and travel.
- A lump sum amount is also needed to buy some golden/diamond ornaments etc.
Nowadays, almost every family use electronic gadgets like android phones, computer or laptop, TV, air-conditioner, fridge, washing machine, water purifier, chimney, etc. and they got damaged very rapidly. We have to repair or purchase a new one. They all together need a huge fund.
How much may be our income, without savings it is a big zero the next day as our earnings and expenditures are the same. If for any reason we do not earn the next day we will have to beg for a living. There will be no difference between a beggar and us.
Money in our pocket or hand cannot be saved. It is the nature of money that if liquid cash is in our hand it will force us to spend it legally or illegally.
Here, the habit to save plays a huge role. Firstly we need a savings account. From there we can easily channelize it in various schemes.
So if we have a savings account and we are saving, then it is fine. But if we have not yet any, we will go to any suitable bank as per our choice and open an account.
Some private banks say Kotak Mahindra etc. even send people to our residence and open an account.
Therefore, the importance of savings is clear to us. If we can save sufficient money, then we can live in a stress-free way. (Also read stress management technique). Moreover, it helps us to stay motivated. As a result, we get motivation to do our works. It, in turn, helps our sound and sufficient sleep along with our deep sleep.
IT IS THE BEST FRIEND.