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As a child, you have always been told the importance of saving money and being financially responsible. A piggy bank was given to you to help you understand why you need money, how to save for something you want to buy, long-term and short-term goals, and how to avoid spending all the money you have.
The same rules apply for grown-ups too. One of the most important things you can do for your financial wellbeing is to get in the habit of saving. It cushions you from emergency events that may require large and urgent expenses: financing a college education, a home purchase, or your retirement.
Saving does not mean miserly behaviour. You don't have to stop having fun or cramp your lifestyle. All it requires is a balance. It's actually very simple — look at what you earn and then look at where you would like your money to be spent. Here's what you can do:
So, how much should you build up and set aside? The right amount will depend on:
Once you start building this emergency fund, make sure that it is not placed at risk and can be accessed easily.
Though it may seem like there is little distinction between savings and investment, the two are independent processes that you shouldn't get confused with. Saving is the process of keeping aside money and parking it in a safe and easily accessible security or account. This includes savings accounts or short-term certificates of deposit. The key element is to avoid risk, at all costs.
Investment is the process of using money to buy an asset that will generate a safe return over time, increasing you net-worth with each passing year. An investment involves risk and includes real estate, fine art, gold coins, stocks, mutual fund, etc. Good investments are the soundest ways of growing wealthy.
Saving always comes first. Think of it as the foundation upon which your financial house is built. It is your savings that will provide you with the capital to feed your investments.
Your savings programme should cover:
It's only after these things are in place that you can begin investing.
The Systematic Investment Plan (SIP) is a regular saving scheme like a recurring deposit. It is a simple investment strategy to accumulate wealth in a disciplined manner over a long period of time. Under this plan, a specific amount is invested in a mutual fund for a continuous period at regular intervals. As an investor, you can buy units on a given date every month; you decide the amount and the mutual fund scheme. Investing regularly through Systematic Investment Plans (SIP), even if in small amounts, brings you many benefits. These plans secure your future; by starting early in your life, you can be assured of a fixed monthly income after your retirement.
Today, there are numerous savings investment plans offered by leading financial institutions. In case of traditional plans, the insurance company takes all the investment decisions on your behalf over the entire policy term. Here, your return on the policy is in the form of a bonus payable on maturity. You can also opt for a unit-linked plan where you can regularly monitor and review your investment decision according to your needs. Here, you decide on the choice of investment and the risk is in your control. There return is in the form of growth in the Net Asset Value. We, at MoneyRaksha, help you choose a SIP that gives you the best guaranteed returns on your investment.