What is the first piece of advice your parents give you when you get your first job? They say, “Don’t spend the whole salary. Save some money for the future.”

Everyone knows savings are important. You might be tired of hearing the same advice again and again. But they have a good reason for reinforcing this message.

Savings ARE important. You can take a loan when you wish to buy something like a house. But even then, you have to supply a minimum down payment.  And then, you also have to pay monthly instalments to repay the loan. This could eat up a big chunk of your monthly salary. So, yes—you need to save and invest.

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Need help with your savings habit? Here are seven ways you can save money and plan for your future needs.

1.      Start Saving NOW!

The best time to start saving money is when you receive your first pay-check. Do not get into the habit of procrastination. Set aside about 10–15% of your salary for savings each month. And make sure to start saving right now. Do not delay. You should never underestimate the power of compounding.

For example, consider the case of Anish and Kunal. The two friends are 25 years old. Anish puts Rs. 2,000 each month into a retirement savings account at a 7% rate of interest. Kunal starts doing the same at the age of 35.

Now, 10 years is a huge gap. Look at their earnings by the time Anish and Kunal are 65 years old. Anish would have saved Rs. 9.6 lakh. Meanwhile, Kunal would have managed Rs. 7.2 lakh. But this money grows differently over time. Their wealth would be starkly different.

Anish will have around Rs. 52 lakh, while Kunal will have only Rs. 25 lakh. This means Anish will have earned roughly twice the amount that Kunal will earn. All because of 10 extra years.

2.      Don’t Just Save, Also Invest!

Saving is when you set aside a portion of your income. This is likely to be in your bank account or maybe as cash in your locker. However, cash earns you zero interest. Bank accounts offer 4-6% interest. However, remember—prices of goods increase every year, sometimes at an alarmingly fast pace. What costs Rs.100 today may cost Rs. 500 five years later. Your cash, meanwhile, lost value. This Rs. 100 would probably grow to Rs. 121-133. How will you afford regular products, forget about luxuries? The answer lies in investments. Options like Fixed Deposits and Mutual Funds help you earn 8-15% every year. This can more than beat inflation—you can even become wealthier.

3.      Pay Off Your Debts

Are you carrying a large amount of debt? Then work on clearing it as soon as possible. Credit card debt or college loans can become a big burden over time. Focus on becoming free from repaying the interest on the debt. You can then concentrate on saving for the future. That said, some debt can be good. For example, home loans can offer a lot of tax benefits. So, instead of prepaying such good loans, you can invest the money in high return-generating options.

4.      Set Savings Goals

An easy way to save money is by visualising why you are saving the money. For example, you may want to buy a car in the next 36 months. Or you may wish to set up a good retirement fund 30 years down the line. Create real goals with actionable timelines. These are a great way to motivate yourself to create savings.

5.      Ditch Some Expensive Bad Habits

Everybody has their own pet vices. But it becomes a problem when these habits become too expensive. Take smoking, for instance. Reya smokes a pack per day. That means she is spending around Rs. 120 each day and Rs. 44,000 per year. Imagine what else she could do with that money. It is not easy to quit smoking, but Reya tried to cut down. She used the money saved to go on vacation.

6.      Some Practical Everyday Tips

A rupee here or a tenner there can go a long way in building a good corpus. Make sure you do it consistently, though.

Anjali was spending Rs. 100 everyday buying lunch at the office cafeteria. She decided to cut costs by packing a lunch. In time, she could see her savings grow.

There are other things you could do. If you shop online, make sure to look for the best prices. You could also invest small sums of money each month in a fixed deposit or mutual fund. These days, you can start with a small sum of even Rs. 500 for investments. And do not forget to take advantage of your tax savings. The returns are worth the trouble.

7.      Look at The Long Term

The ultimate goal of saving money is to be able to afford different things in the future. You may want a big house for the family or to fund your child’s college tuition. To realise these dreams, you need to create a good plan. This is where investing enters the picture. There are many good investing options that offer great returns. A fixed deposit is one such option. It is risk-free and offers high interest rates on FD. Investing in FD (Fixed Deposits) can help you accumulate wealth over a period of 20–30 years. There is the potential to save a few crores for your retirement. You could even invest in mutual funds or stocks to earn high returns. But before you venture into these options, make sure you can handle the risk.

By now, you know that savings are necessary for a smooth ride into the future. But did you know, it is equally imperative that you do it right. Make sure you avoid the common mistakes people tend to make while saving and investing.


The bottom line:

So, set up a savings plan and start saving on a regular basis. These simple ways to save money can help you reach your goals much faster.

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