Importance of Saving Money
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What is the Importance of Saving Money?

 What is the Importance of Saving Money?
  • 13th Jun 2022 |
  • 3,935

Many studies on wealth expenditure suggest that most people tend to spend extravagantly when they have a higher income. If you closely observe this in your life, you’ll realize that your standard of living gets better as your income increases. Unfortunately, when you fail to comprehend that your ‘want’ is not your ‘need’, you tend to prioritize luxuries, spending way more than you earn. This leads to a financial situation where you neither save more nor grow your reserves.

What’s the solution to get off this never-ending cobweb of financial dependency? The answer is saving money.

Yes! Saving money may sound very easy, but don’t be fooled by how simple it seems. Saving money can be tough if you don’t have the right money saving plan, alongside the support of the best money saving tips.

This article discusses aspects related to saving money. Here, we will talk about the best way to save money, the best money saving plans, the importance of saving money, and share some good money saving tips to use in daily life.

Why Should You Save Money?

Now, you must be thinking about why saving money is necessary? And what is the importance of savings? Let’s consider an example and understand this. Picture yourself as the new employee who has just started earning. As a young adult fresh out of college, you must have numerous desires. From owning your first bike to buying costly cosmetics to getting expensive gifts for your near and dear ones from your first salary, and the list goes on.

Though it seems like the best idea initially, it isn’t because you should always be prepared for a situation where your liabilities grow more than your earnings. Also, having such a lifestyle where you focus on investing in liabilities without any savings can act as a disaster in long run. Plus, you would also limit yourself from creating wealth to survive situations where savings might fall short. This further serves as an invitation to big financial troubles in the future. Therefore, to ensure you don’t land in such a situation, you must understand the importance of saving money.

The reality is that in a world full of lures, saving money from your income requires a lot of sincerity and discipline. But, at the same time, even if you have sincerity and discipline, you will not be able to grow your savings without a decent and wise money saving plan.

How Much Money Should You Save from Your Salary?

Honestly, this is the most important question you should ask before moving ahead with a full-proof money saving plan. Your salary or income binds you to a financial limit to a certain extent. So, if you are a salaried employee or someone dependent on a monthly income, your focus should be on how much you can save money and not on how much you earn.

If experts are to be believed, then as a general rule of thumb, ideally, a person should keep around 50% of their income for routine expenditures, as much as 30% for lifestyle, and the remaining 20% must go to savings.

However, given the reality of life and your goals, financial advisors suggest cutting short on luxuries and saving more, close to 35-40% of your income if possible. This will help you easily achieve your short-term and even long-term goals.

Top Money Saving Tips

Undeniably, you want to get the key to the best way to save money. However, if you look right into your daily life and follow some easy money saving tips, you can save a large sum of your income.

  • Making a monthly budget plan
  • Finding the right areas to cut expenses from your monthly budget
  • Saying ‘NO’ to credits and debts
  • Believing in saving money, living better
  • Finding the best money saving plans and investing in them wisely
  • Considering salary hikes and bonuses as savings
  • Cutting fines/penalties by timely payment of EMIs and bills

Best Money Saving Plans

Having understood the criticality of saving money, it is only wise to find the finest investment options. Of course, the best tool depends on your financial goals. However, the following are some of the safest investment products you must invest in:

  • Mutual Funds (SIPs)
  • Finding the right areas to cut expenses from your monthly budget
  • Saying ‘NO’ to credits and debts
  • Believing in saving money, living better
  • Finding the best money saving plans and investing in them wisely
  • Considering salary hikes and bonuses as savings
  • Cutting fines/penalties by timely payment of EMIs and bills

Best Money Saving Plans

Having understood the criticality of saving money, it is only wise to find the finest investment options. Of course, the best tool depends on your financial goals. However, the following are some of the safest investment products you must invest in:

  • Mutual Funds (SIPs)

Systematic Investment Plans or SIPs are one of the best ways to start your savings and investment journeys. In this, you can start investing with as low as ₹500 every month and slowly increase the contribution in the coming years. Constantly investing for 10-15 years can help you achieve good returns when you need your money the most.

  • ULIPs

Unit-Linked Investment Plans or ULIP is another good financial product to help you create wealth in the long run. The idea is to pay a yearly premium which is then divided into two components: investment and insurance. In case you face an unfortunate incident, your family can get the returns and death benefit too. A two-in-one solution.

  • Guaranteed Savings Plan

Similar to ULIP, Guaranteed Savings Plan also allow you to invest a yearly premium for a specific period and give you guaranteed returns over years. However, the difference here is: ULIP allow you to invest in different options like equity, debt and so on which provides you an opportunity to earn optimal return.

Don’t get us wrong, both plans are best as per the requirement. If you are looking for guaranteed returns to achieve a life goal, guaranteed savings plan is your saviour. However, if you are looking for a much-balanced return with high-risk appetite, ULIP is your friend.

  • PPF/EPF

PPF/EPFs are other excellent options for investing and savings. These plans also allow tax savings which is great. Another benefit is that these schemes are run by the Government and hence, your money is safe.

Other investment and savings avenues for everyone are:

  • Retirement/pension plans
  • Other suitable savings schemes

The bottom line is that you should save money without cutting on your basic needs and ensure that you don’t land up in an unfortunate financial situation without the right backup.

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