Savings Habit: Makes a Good Life

After the end of the financial year and the start of a new financial year, it's good to try to save more money. Saving is basically when we keep some of the money we earn instead of spending it all right away. According to our forefathers saying implies that "बचत ही भविष्य कि लाठी होती है". It suggests that we should not spend money than we earn. Saving money is really important for getting richer over time and making sure we have a secure financial future. Saving always gives us a way out of the uncertainties of our life and it provides us with an advantage to enjoy quality life.

When we talk about savings, people often get confused with savings or Investments. Hence, let us understand the difference between these in the following table-

We will talk about both savings & Investments in this article.

SAVINGS

Saving money is important aspect for many reasons, and it plays a very important role in achieving financial security and well-being. Here are some key reasons to save money:

• Long Term Protection: The future is not predictable, and financial emergencies can stand anytime but saving money allows to us create a safety wall for our future expenses as well as unplanned financial needs. So save money provide us, more peace of mind against future needs.
• Reduce Stress: If we having adequate savings enable to us live enjoy full life. We are more likely to be less stressed about our future goals like retirement or unexpected expenses. Savings allow everyone to be easy life with stress less, knowing to have sufficient funds to navigate different situations in our life.
• Debt Management: Having savings can helping to us for manage and reduce debt. If unexpected expenses arise, we can use our collected savings instead of relying on credit cards, personal loans & lend money from friends & relative. Saving is helping to avoid high-interest loans.
• Achieving Financial Objective: Saving is essential for reaching specific financial objective, such as buying a home, starting a business, or funding education. It allows us to build the necessary funds in the time.
• Retirement Planner: Saving for retirement is crucial to ensure a get easy and secure lifestyle in our future years. When we start saving in earlier age, then we will get more money and time to increase our saving through compounding.

How to increase our savings involves a combination of budgeting, cutting expenses, and finding ways to boost your income. Here we are discussing few aspects to help us increase our savings: -

• Always try to make budget: -We should always try to make a good budget at the starting of the month to achieve savings plan and set a budget for spending. This budget focus on what is important reduces the chances of extra spending.
• Minimum use of credit cards:- We should always try to minimum use of Credit cards unless until it is more essential, When we use credit cards always try to pay in time otherwise credit cards provider penalized higher interest and extra charges and it is reduce our savings.
• Cut unnecessary expenses: -Always try to identify non-essential expenses and find ways to reduce or eliminate them by set of priorities.
•  Smartly shopping: - Shopping smartly involves strategies that help us save money, make informed decisions, and look for discounts, use coupons, and compare prices before making purchases.
• Invest in long term financial tools: -Investing your money in a long-term investment plan can have many additional benefits. These plans offer a good rate of interest that lets money retain its value and try to beat inflation.

Government Policies and Savings Promotion

Governments worldwide recognize the significance of fostering a culture of saving within their populations. Various policies and initiatives are often implemented to encourage individuals to save and invest responsibly in every Finance Budget. The Government of India promoting people to save money by offering them the chance to pay less tax if they invest in certain savings programs like the Public Provident Fund (PPF), fixed deposits (FDR), life insurance, the National Pension System (NPS), and the Sukanya Samriddhi Yojana ,( बेटी बचाओ बेटी पढ़ाओ योजना )girls. By doing this, people can save money for the future and get a break on their taxes, which helps everyone save more money and makes the country's economy stronger. Educating individuals about the importance of saving, different saving options, and the impact of their savings on the overall economy empowers them to make informed financial decisions. In the era of digital finance, promoting accessible and user-friendly financial platforms further facilitates the adoption of healthy savings habits. For example, if a person saves just Rs.1000\- Per Month from the age of 30 he will receive approx. 12,00,000\- end the age of 60 by annual return @8.00%.

(Deposit in crores information received from money control.com of SBI Balance sheet https://www.moneycontrol.com/financials/statebankindia/balance-sheetVI/SBI)

(Amount deposit in crores)

INVESTMENTS

Investing is a critical component of financial planning, offering individuals the opportunity to grow their wealth and achieve their long-term financial goals. With a plethora of investment options available, understanding the various avenues for investment and their respective advantages is essential for building a diversified portfolio. In this article, we will explore different investment options, ranging from traditional to alternative assets, and highlight the advantages they offer in terms of potential returns, risk mitigation, and portfolio diversification.

Shares & Security

Investing in shares and securities is a common and smart way for people to make their money grow and reach their financial goals. When people invest, basically buying a piece of a company that anyone can buy on the stock market. The good things about investing in stocks are that they have a history of making more money compared to other types of investments, they can give regular payments from the company's profits (called dividends), and people can easily buy or sell them on public exchanges whenever you need .

Bonds & Debentures

Bonds & Debentures are kind of like loans that governments, companies take from people to get money. When investor invest in bonds, he has basically lent money to these groups, and in return, they promise to give your back money at a certain time, which is called maturity, and also pay you regular interest. If we put money into bonds, they can make us money regularly through the interest we get.

Mutual Funds & SIP

In the current scenario Mutual fund & Systematic Investment Plan (SIP) both most popular for growing money. With SIP, investor can put a small amount of money regularly into a mutual fund, start investing in mutual funds through SIP with an amount just Rs.500/-. It's like saving a little bit regularly, making it easy for many people to join in, even if they don't have a lot of money. Investor can also easily buy or sell parts whenever wants. So, SIP and Mutual Funds are like a friendly way for to grow money without needing special knowledge.

(Amount investment SIP in crores)

(SIP Investments in crores information received from AMFI https://www.amfiindia.com/mutual-fund)

Real Estate

Investing in real estate means buying homes, land, or buildings with the goal of making money. Real estate has some good things if rent out property by investor can get a regular amount of money, via rental income. Also, the value of real estate usually goes up over time, helping make more money by appreciation. So, investing in real estate is like having another way to make money and grow your wealth.

Covid Impact on savings and investments habits

We all know how the COVID-19 pandemic has changed our lives to a great extent. It has made many countries' economies worse and created disruption in regular people's lives. Because many people lost their jobs, they couldn't get enough food or medical help when everything was closed down. Others spent their life's savings on medical bills for their loved ones, leaving them cash strapped. The struggles have continued well into 2021, but fortunately, people have learnt from previous mistakes.

Some of the major takeaways from COVID-19 were:

(1) We must have savings kept aside for uncertainties.

(2) It is important to have a healthy work-life balance for our mental health.

(3) Having a good life insurance as well as health insurance policy is a must

(4) We must put a leash on our spending habits.

After the COVID-19 pandemic, many people have realized the importance of saving money. Some who used to spend without much thought are now thinking differently. People are exploring new ways to invest for the long term, like getting insurance, investing in gold, and other things that can grow in value over time. The pandemic made a lot of us realize how unpredictable things can be, so many started saving more money in case of emergencies. Also, when it comes to investing, more folks are choosing safer options like fixed deposits and gold, rather than riskier choices. The way people handle money is also changing, with more using digital platforms for banking and investing because of the pandemic. Governments, including India's, have tried to help with economic challenges by introducing relief measures and stimulus packages, and this can also affect how people save and invest. Plus, changes in interest rates by banks, like the Reserve Bank of India, can impact how much money people make from their fixed-income investments. All these shifts show how the pandemic has influenced how people think about money and plan for their financial future.

One big thing that helps incomes grow a lot is how much money a country saves. That means putting aside some of the money the whole country makes to use later on. This money gets used to build new factories, roads, and stuff like that, but it's also super important for making schools better, doing research, coming up with new ideas, and helping people start their own businesses. India GDP now became the 5th largest with a GDP of approx $3.73 trillionth as per ministry said that in the next three years, India is expected to become the third-largest economy in the world, with a GDP of $5 trillion.

(GDP 2022 in US $ Trillion from Economy of India)

Conclusion

It's hard to forecast the future, but we can manage the outcome if we save sensibly and restrict unnecessary spending habits. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings& Investments. By allocating 20% of your income to savings& Investment we can set up tools for building wealth and achieving long term financial goals example: - an emergency fund, prepare for retirement, pay off debt, investments and made diversification portfolio, or pursue other financial goals. By consistently saving this amount, we establish sound monetary practices and build a safety net for unexpected costs or future goals. In my opinion, both types of savings (long term investments as well as short-term savings) are good, but it depends upon the future objective. I suggest everyone that we should invest in both types of savings. This article only for informational and education purpose; however it is advisable to consult with tax professional for specific issue and challenge.