Ultimate financial success results from savings and investing. Therefore, to overcome the financial struggles, an individual needs to develop a few financial habits; investing after saving is one of them.
Several financial instruments are available to make investments in the financial market, like shares, mutual funds, bonds, futures & options contracts, government debt funds, government savings scheme - Public Provident Fund (PPF), National Savings Certificates (NSC), and others. One can choose investments based on their risk appetite. An individual with a low-risk appetite can choose safe investments like fixed deposits and a systematic deposit plan.
Here is why an individual should put in all that effort to save money:
Step 1: Prepare a Budget
Understand the cash flow. Be realistic about your household expenses and financial situation. Have a budget and adhere to it. It will help you to set real and attainable goals of savings.
Step 2: Distinguish Between 'Want' and 'Need’
Understanding 'needs' vs. 'want' is necessary. It includes evaluating shopping and spending habits and saying no when something weakens your financial goals.
Step 3: Segregation of accounts.
It would be best to have two separate accounts - a savings account and a regular salary account or a business account. You can set aside savings in your savings account and link this account with your investment for automatic deposit payment. You will need not worry about 'how to save money every month.'
Ideas on how to save money include the involvement of your family members to save money.
As mentioned, there are several financial investments available for an individual like stocks, FDs, Govt. Saving Schemes and you need to choose the investment based on risk appetite.
You might be familiar with:
A fixed deposit guarantees consistent returns at a fixed interest rate and offers various interest payment options.
With an FD, your savings earn in the following manner:
The investment amount in one go is Rs.25,000 invested for 5 years. The interest rate is up to 6.75% for Bajaj Finance FD.
Using the FD calculator, the interest payout is Rs.1413 and the maturity amount is Rs.26413.
The SDP is a tool for regular savings where an individual can invest a small amount on a monthly basis to get high returns at the fixed interest rate of fixed deposits. Every deposit made by an investor creates a new fixed deposit account.
1. SDP is one of the effective ways to save money on a tight budget. You can start investing with just Rs.5000 monthly and choose from a tenor from 12-60 months. Under the single maturity option, the tenor of each deposit will be reduced in such a way that all deposits get matured at a single date.
2. You can choose one date to make deposits for your SDP deposits. It can be the 3rd, 7th, or 12th of every month.
3. SDP investment is available with two types of maturities, which makes it a unique investment. You can choose a single maturity scheme for a common maturity date for every deposit you are making every month or you can choose a monthly maturity scheme for different maturities of different deposits.
If you are confused with questions like ‘how much should I save’ to make an investment in SDP, you can use the SDP calculator.
Here is an example to show how your savings grow using the SDP calculator. Both customers are investing online Rs.5,000 every month for 12 months and choose to make 12 monthly deposits.
|Investor’s Category||Interest Amount on Every Deposit||Monthly Payout||Total Payout||Total Interest Earned|
The SDP interest rate applied may vary based on the investment amount. You can earn interest at lucrative rates of up to 6.75%.
You can ofcourse look at market linked instruments to save and multiply your wealth through stocks, mutual funds, ETFs and others but the comfort and stability in fixed income instruments is the basis of real saving.
Saving is the most basic bit of financial advice out there. And investing is its following step as saving isn’t enough. If you consider the above explained money saving steps and investing avenues, you will see your savings growing over time.
Did you know, a good CIBIL score can help you get a better deal on loans and credit cards?