Business Insider reports that “Indian household savings fell to the lowest level in 5 years. With inflation eroding the purchasing power, individuals tap their savings for survival after the pandemic.”
Furthermore, “gross financial savings in FY22 stood at 10.8% compared to 15.9% in FY21.” It demonstrates a clear saving pattern during the pandemic and erodes it soon after the ban was lifted.
The importance of saving money aligns with the lifestyle and the goals you want to achieve within the decided time frame.
6 reasons to save money wisely
From blowing off emergency cash requirements to ensuring financial freedom, there are plenty of reasons to save money.
1. Live a debt-free lifestyle
Business Insider news says, “ An average Indian spends ₹14,500 a month on average on credit cards.”
As per Statista, “In June 2022, nearly 121 million points of sale transactions were made via credit card in India.” It was pretty low in 2019-2020, owing to pandemic blues.
Relying on credit cards for every big and small purchase may impact your savings. A credit card is a high-interest debt that one must pay monthly.
Instead, save a portion of your income to savings. It will help meet discretionary expenses.
2. Budgeting for retirement
As per the Financial Express report, “A survey by PGIM Mutual Fund and Nielson reveals more than 51% of the Indians participants have not planned retirement savings yet. “
Shockingly, children’s spousal security and lifestyle emerged as primary concerns rather than retirement.
The allocation of household income fell from 34% to 30% over the past two years. It impacted the saving corpus and budgeting. Around 89% of respondents living in Joint families find themselves more financially secure than nuclear families in India.
The report reveals that 42% of Indians lack any secondary income source or have any thoughts about it.
One must consider inflation and market conditions before choosing a retirement saving plan to counter this.
Employers must work towards awakening employees on saving more towards PF or separate retirement accounts.
The key aim here is to push the employees towards ensuring financial freedom.
3. Paying effortlessly toward a child’s education dreams
As per the Economic Times, “the average yearly fee for middle school is around ₹1.6 lakhs to ₹1.8 lakh/year. It totals up to ₹9.5 lakh to 12 lakh for Higher Secondary Education.” Parents must ensure nearly 10 lakhs for legal education in India.
Parents pay ₹25000/year towards sports, extracurriculars, and school transport alone.
The education expenditure graph goes up to ₹20 lakhs after including general education for up to college years.
EduFund lets parents plan and save for their child’s education with the help of financial experts.
4. Attending Medical Emergencies
However, there are other emergencies too, like – urgent cash needs, cash to suffice sudden job loss and fulfill a time-sensitive requirement, and medical tops them all.
It is the worst situation to encounter when one goes cashless in medical emergencies. Illness does not wait.
Thus, it is ideal to invest at least 30% of your income in medical insurance and savings. However, the statistics are good regarding health insurance coverage awareness.
The Times of India says, “Every 3 in 5 Indians saw their health insurance premiums shoot by 25% or more in 2022.” It impacts savings and discourages one from taking life for granted.
5. Leaving behind a legacy
Financial freedom must travel from generation to generation. “Around 72% of Indians do not know the potential ways to save and invest money.” They encounter confusion while walking up to the aim of financial freedom
If you are a first-time investor, you can begin by investing in low-risk instruments. Dedicate only a small and comfortable income portion to long-term investments.
Go for fixed-income generating opportunities that reduce the risk of losing your wealth. It will help you analyze the importance of saving money as a source of multiplying wealth sources.
6. Purchasing big-ticket items and investments
Big-ticket items or lifestyle-enhancing instruments like- car and home investments require significant savings. Buying a home is one of the common dreams that Indians share.
As per Indian Housing Report, “Only 69% of urban households have their own home. Rest are migrants.”
It is far lower than in rural areas (95%). The reason is – Affordability. For a mortgage, you must ensure at least a 20% deposit. For that, you must save.
If you could provide a 20% deposit for the mortgage, you could fetch affordable interest rates and use the rest of the savings for renovation or cover moving costs.
Conclusion
Saving is crucial for every life goal. EduFund is an ideal platform to save for your child and family’s future:
- Financial planning and goal management assistance
- College Cost Calculator to find future costs
- Variety of savings plans – mutual funds, US ETFs, and digital gold
- Educational counseling and financial guidance
