Complete guide: Ways to save money in a middle-class family?
Saving money in a middle-class family is stressful. Lack of finance knowledge, poor budgeting, relying on a single-income family member, and increasing prices of daily goods and services are some of the biggest barriers to saving money in a middle-class family.
Another core barrier is saving in FDs over investing. Most Indian middle-class families prefer to keep their money safe in fixed deposits or savings accounts which do not offer attractive returns that could beat inflation.
If you too are struggling with wealth creation then here is how to save money in a middle-class family to secure your future.
- 1. Make term insurance your best friend
- 2. Make saving a monthly chore
- 3. Wealth creation via monthly SIP
- 4. Place a limit on your credit card use
- 5. Set a shopping budget for yourself
- 6. Compare costs before spending
- 7. Create a passive or secondary income
- 8. Teach your children to save early on
- 9. Be open about your finances with your family
- 10. Create a will to protect your family’s future
1. Make term insurance your best friend
Buying term insurance is one of the easiest ways to save money in a middle-class family. The cost of buying term life insurance is pretty low, especially if you are young and healthy.
Most insurance companies offer term insurance worth lakhs at an affordable yearly premium of Rs. 12,000-13,000.
Term insurance can give your family a good cover amount in case of uncertainty of death. Always think about protecting your family through the right term life insurance.
2. Make saving a monthly chore
When it comes to savings, make it a habit. Whether it’s savings small sums of money in digital gold or a PPF account monthly, savings should be treated as a habit and a monthly chore!
Start this practice with “pay yourself first” by setting aside money from every paycheck. The next thing you can do is, save for multiple goals like an emergency savings fund, vacation fund, down payments, education corpus for your child, etc. Stick to this plan to the best of your ability and find the best home for your savings.
Additional read: What is the education gap?
3. Wealth creation via monthly SIP
The best way to save money in a middle-class family and work towards wealth creation is to start a SIP! You can invest very small sums of money every month regularly for a long period of time and create a healthy corpus by the end of the period.
4. Place a limit on your credit card use
Avoid using credit cards frequently! Most financial advisors urge clients to limit their credit card use to 30% of the total available credit. For instance, if you have a credit limit of 5,00,000 then the credit you can use is 1,50,000!
Credit card companies offer attractive schemes to trap you into spending more so be careful. Another way to save money is to always pay your credit card in full amount rather than the minimum pay offered by the card companies.
5. Set a shopping budget for yourself
Make a habit of thinking before buying a particular thing. There’s a difference between want and need. If you cannot differentiate between the two, you cannot save money in a middle-class family.
Before buying, you should analyze whether you need it or you want it. Give yourself a week to decide. Spending that much time will make you think twice and buy only what you need.
If you enjoy shopping then give yourself a shopping budget and try to not overspend on it!
6. Compare costs before spending
In our rush, we sometimes forget to compare product features and prices in search of better options. Given the posh showroom atmosphere and the impressive conversations of the highly paid salespeople at the counter, we refrain from bargaining and looking for other means of comparison.
Always compare prices on websites and other stores and pay the best price while spending your hard-earned cash. Every penny saved earns an extra penny at the end of the day.
7. Create a passive or secondary income
Besides your regular job, you work towards creating different streams of income. Look for opportunities, and try to create a passive income by renting your assets like an apartment or room.
You can take up secondary income jobs if you have the time and your primary job allows it!
8. Teach your children to save early on
Kids have no idea about how to save and how to earn money. Parents have to teach them and encourage the habit of saving from an early age. Make your children understand the value of money and how much effort it takes to earn it.
Give them monthly pocket money and teach them how to make the most of their money. Teach them to save a portion of it regularly. This habit will help them in the long run.
9. Be open about your finances with your family
As they say, communication is the key. Parents should discuss finances with their children. This wouldn’t only make them aware but is good for their general knowledge.
Maybe with that knowledge they can also plan their future. Don’t leave them in the dark about financial assets built for their bright future.
10. Create a will to protect your family’s future
India has Rs 82,000 crore in unclaimed assets. This money is spread across pensions, savings, mutual funds, stocks, government schemes, etc.
All due to a lack of planning and foresight on the owner’s front. So be careful, make sure you have a legal will in case of any emergencies. Make sure your children and family members are aware of your savings, investments, and assets that can help them in the long run.
It might sound difficult to save money in a middle-class family, but following the above steps, proper planning, and execution can help you to achieve your financial goals.
Saving in small amounts is easy; starting saving early and channelizing your savings could become a key to your successful financial freedom.