Saving – the one thing every kid learns, whether it is to buy chocolates, the new Batman figurine or craft kits. We’ve all grown up with this one good habit, one we know the importance of, and continue to practice.
Of course, in our adulthood, we’re saving for bigger things, while enjoying the smaller pleasures of life.
But are we saving enough?
To answer that, we need to truly understand the power of savings and what regular savings in the right avenues can do for us.
Let’s look at #7 reasons why we need to save every month.
Reason #1: Save for financial independence
This, we all know. When we save, we become capable of buying what we want, without having to borrow any money. Loans are an expensive affair, aren’t they? Saving is empowering.
Reason #2: Save for goals
Our short term and long term plans require careful planning and regular saving. Whether it is to buy an expensive gadget, a car, a family vacation or a child’s education, setting aside money for these goals is a good practice.
Reason #3: Save for retirement
I’ll admit this is a long term goal, but it’s one that warrants importance. Why? Simply because life expectancy is going up, and we may need more than we anticipate our expenses to be. Our retirement is supposed to be our happy years, free of money worries, and for that, we need to seriously save, to maintain the kind of lifestyle we have or upgrade.
Reason #4: Save for emergencies
Sometimes unfortunate events that can’t be predicted happen. We or/and our spouse may both lose our jobs, or there could be a medical emergency in the family, and the insurance isn’t enough. Having an emergency fund is a good idea, for it covers our bases, and keeps us afloat. It is advisable to save up to 6 months’ (or more) worth expenses in the emergency fund.
Reason #5: Save for unforeseen expenses
There is a difference between saving for emergencies and saving for unforeseen expenses. For example, the car breaks down and it needs servicing – that’s predictable, and not an emergency. Or the house has a big leak that needs fixing, or we have to replace an appliance we’ve been using. It’s best to save separately for these expenses, so we don’t have to eat into our emergency fund for anything but real emergencies.
Reason #6: Save to keep our options open
We work hard to earn, and we deserve to splurge every now and then. Mind you, just every now and then. Go for a fancy dinner, or on a road trip, visit a spa, or just go shopping, whatever we choose, saving keeps our options open.
Reason #7: Save to keep inflation at bay, but here’s the kicker – Invest to BEAT inflation!
Saving is great, but while your savings grow with time, are they growing enough? Your savings earn nothing at home and earn an interest of 4-6% in the bank. But inflation (rise in price of goods and services) in the country is around 4.7%*. That’s hardly any ‘real’ growth and I believe our savings can do much better, if deployed in the right way.
Mutual funds are a great avenue to invest in. There are several, but with the right financial advisor you’ll easily be able to the pick the good ones. By investing in funds that match one’s investment profile and duration, deploying savings in mutual funds could be really beneficial. They not only beat inflation, but give you the advantages of professional money management, diversification, liquidity and affordability. Check out 7 reasons why you should invest in Mutual Funds.
That’s it folks! The reasons I believe we need to save every month. Time to put our savings to better use!
*Rate of inflation is the average of the past year’s inflation from February 2016 to February 2017.