Saving money is the building block of creating a financially secure life and building a wealth corpus. Understanding the importance of savings can help you systematically put aside funds for life’s unexpected twists and turns and gain financial freedom. From planning a vacation to retirement planning, saving money for the future can help you meet your life goals.
Rising levels of inflation and the turbulent job market of 2024 have further amplified the importance of savings in every individual’s life.
Also Read: How to Invest your EPF Savings
Why is it important to save money
When discussing why saving is important, it is crucial to note that reasons for saving differ from one person to another depending on their life goals and priorities. That said, here is a quick overview of the common reasons to save:
- Meet life goals
Whether you want to buy a dream home, send your kids to the most prestigious institutions, or enjoy a comfortable retirement, you will need to plan ahead and save. Saving today is important to have a corpus available for your life goals when you are ready to achieve them. Moreover, the sooner you start, the faster you are likely to achieve them. - Handle unexpected expenses
An emergency fund is a vital financial safeguard that everyone should prioritise. This reserve protects you against unforeseen expenses. From minor inconveniences like a vehicle breakdown or appliance repair to significant events like medical emergencies or job loss, your emergency fund provides crucial support. Consider investing your emergency savings in a high-interest FD for optimal returns while maintaining the liquidity essential for such contingencies. - Reduce your stress
Financial uncertainty can take a toll on your mental well-being. Thus, understanding the importance of saving money to reduce stress is essential. Knowing that you have a savings nest with a certain amount of money gives you peace of mind and helps you stay in control of your finances. A disciplined savings approach allows you to enjoy life without worrying about expenses. Savings help create a security financial standing, allowing you to better manage other external pressures. - Prepare for the future
No one can successfully predict what the future holds. Even if you have a certain vision of, say, the next 5 years, there is no guarantee that these years will pan out the same way. Saving money for the future helps you prepare for any future contingencies. - Career flexibility
Building a savings corpus brings you career flexibility, creating a financial cushion to support you during periods of unemployment or a job switch. With enough savings to fall back on, you can flexibly choose to take a sabbatical from work, work part-time, or take a break and even start your own business.
How to save money
Now that you understand why saving money is important, it is time to review some of the popular ways to save money. You can use the simple money-saving tips mentioned below and then invest the saved funds in effective money investment instruments to earn returns and grow your corpus:
- Start small
You do not need to save a large lump-sum amount all at once, immediately. Rather, give yourself small and achievable saving targets and watch your savings corpus grow over time. You can start by depositing a fixed sum of money into an RD account every month. Typically, these accounts offer higher interest rates than regular savings accounts. You can also gradually increase this monthly contribution to effectively grow your savings. - Use unexpected Income
Direct any unexpected financial gains, such as tax refunds or bonuses, into your savings. This helps boost your savings for the month without impacting the monthly budget. If you receive a sizable windfall, park the funds in a high interest paying FD like the Bajaj Finance FD that offers interest of up to 8.65% p.a. - Automate your savings
Create a standing instruction for your bank to auto-deduct and transfer a certain amount from your salary account to a separate savings account. To ensure you always have enough funds to save, schedule the transfer at the beginning of the month. You can also opt for a sweep-in facility where the bank auto transfers surplus funds from your savings account to the linked FD account. This will allow you to enjoy high interest yield along with easy liquidity. Automating savings is an efficient way of saving for the future as it eliminates the need to manually set aside money every month. - Review your expenses
Unnecessary expenses can eat away at your savings potential. Reviewing and auditing your credit card statements, bank statements, and digital payment ledgers helps identify avoidable expenses. Eliminating such expenses can help you redirect these funds to your savings pool.
Conclusion
Learning why savings is important early on can help you create a corpus to meet emergencies and achieve financial goals. When invested in the right way, savings can benefit from compounding interest yields to grow over time.
Whether you wish to see your savings grow without capital risk or simply want to add a buffer to your portfolio, consider investing in a Bajaj Finance FD. Enjoy interest rates of up to 8.65% p.a. on special tenures, flexible payout options, and a swift online application process through Bajaj Finserv website or app.
