Money isn't everything, but it can have an impact on one's personal well-being. While one may be earning enough money, creating and sticking to a savings plan can be difficult because many people cannot resist the temptation to spend too much money on things they do not need.
What do Indians buy with their money?
• 30% of Indians say they cannot afford to go on vacation.
• 1 in 3 Indians in central India say they cannot afford to eat out, compared to 1 in 10 in west India.
• 35% of unqualified Indians and 10% of master graduates say they cannot afford to eat out.
• 70% of Indians spend less than Rs 1,990 on online shopping on a monthly basis.
These statistics show that saving is a necessity and one cannot say no to saving because it can help one live the lifestyle they desire while also acting as a saviour in the event of a financial emergency. Even today, 50% of Indians save zero to 20% of their income, and 20% save between 20% and 30% of their income. According to a survey conducted by PGIM India Mutual Fund and Nielsen, more than 51% of Indians have not planned for retirement at all.
People struggle with saving in general, and especially with sticking to a savings plan. However, many people are still unaware that creating and adhering to a budget can help pave the way for a prosperous financial future.
The jam jar method, which involves dividing the money into separate pots for catering to various expenses, is one of the most effective methods of saving money. The savings pot method is an excellent way to ensure that your bills are paid and that your money is allocated to the goals you have set for yourself. Saving pot-can actually assist one in better planning for their goals.
A savings pot is similar to a piggy bank in that you set aside a portion of your income to save for a vacation, wedding, or other financial goal. This ensures that you have saved a certain amount of money from your earnings and will not have to spend money from your earnings or other investments.
A savings account can help you meet both long-term and short-term objectives. Even as children, we were taught the value of having a piggy bank, but we should also teach children the value of having a separate bank for each purpose so they can meet their financial needs and easily get through difficult times.
The advantages of having a Savings Account
If you're planning a vacation, a wedding, buying a car, or any other financial goal, here's how starting a savings account can help:
Keep track of your progress by: Having a single savings account means that you will see all of your money saved in one place and will be unable to differentiate in the event of an emergency or when attempting to meet a goal. With separate accounts, you can see that you have Rs. 10,000 set aside for your car purchase, Rs. 5,000 set aside for gold purchases, and Rs. 1,00,000 set aside for your wedding—this way, you can have a better understanding of how much more you would need to fulfil your goal based on your priority.
Start saving more money: For example, if you already have one lakh saved up for wedding expenses and need another 50,000 in the next three months, you will need to borrow $50,000.
Easily accessible: Creating, maintaining, and liquidating a savings pot is now simple thanks to online banking services provided by banks and the growth of neo banks. One can open a savings account for each goal. Alternatively, you can invest in stocks to meet long-term objectives and in fixed deposits or non-convertible debentures to meet short-term objectives.
Reduce temptation: Keeping all of your money in one place makes it easy to overspend. For example, you may intend to save for both a car and a gold purchase in the same account, but when you go gold shopping, you end up spending all of your money on gold and have no money left over for a car purchase. Setting separate goals in this manner can help you ensure that you set aside a portion of your money to fulfil your separate goals.
Savings provide a stronger incentive to stick to a financial plan; it thus enables you to plan well and save enough for the future without incurring any loan or personal debt from family and friends. Furthermore, if you believe that leaving your money in a savings account will not yield any returns, you can diversify your investments by saving in areas such as life insurance, non convertible debentures, PPF, and so on. However, keep in mind that each investment should have a specific goal, and you should avoid early redemption to ensure you can save and avoid the associated redemption charges.
(The writer is Founder of Credit Fair)
