Saving money is an important aspect of managing your finances and building a secure financial future. Learning how to save the money not only teaches you an important lesson of life but also helps you gain financial freedom.
While it is important to save money, this is easier said than done. From managing unexpected expenses to planning big spends, there may be several good reasons to spend your money. However, saving your money is possible and you need to inculcate the habit from an early age.
This is especially important if you plan to invest and live off the interest you earn. For instance, with a ₹1 Crore FD, interest per month with the monthly payout mode would equate to around ₹60,000, depending on the interest rate and the tenure. Do note that these monthly earnings are quite significant, but to get to this stage, you would need an investing corpus of ₹1 Crore.
Being smart with money can help you get there, and saving is a part of the journey. To help you understand the importance of saving money, here are some pointers to consider.
Crucial Reasons to Save Your Hard-earned Money
- Helps manage unexpected financial emergencies
Life is unpredictable and you may have to deal with unexpected expenses. These include unplanned hospital expenses or car trouble, and in most cases you would have to shell out quite a bit of money. But If you saved money, for the specific purpose of emergencies, getting through such circumstances is easy.
Once you get into the habit of saving money, your money acts as a financial cushion to fall back on. Alternatively, saving funds regularly can also help you become financially disciplined as you are aware of your expenses.
- Allows you to plan big-ticket purchases
While your savings can help you tackle emergencies, accumulating money also enables you to fund big-ticket plans. Buying a home is one of these crucial decisions and you will be required to make a down payment on your house, if you buy it with a home loan.
In some cases, the down payment can be approximately 20% of the total price. To pay this considerable sum, you require substantial savings. Another benefit to note is that paying a large down payment can save a lot of interest on your loan repayment.
- Provides financial independence
Being financially independent is an important factor to consider and that’s precisely why you need to develop the habit of saving money. When there’s a good amount of savings, you put yourself in a favourable position to make decisions without stressing about funds.
- Encourages you to live debt-free
Leading a life free of debt is one of the prime reasons to save money. For this, you must save your income regularly. Managing all your expenses using credit cards may be a challenging option in the long run.
This is so because you have to clear your credit card dues within the stipulated timeline else you may end up paying heavy penalties. While you may use credit cards to tackle some expenses, saving funds regularly can minimise your dependence on credit.
Fixed Deposits: One of the Safest Investment Options
Now that you know why it is vital to save money, investing your savings in fixed deposits is one of the most reliable and secure options to grow your wealth. Whether you choose a company or bank FD, fixed deposits offer competitive interest rates, higher than a savings account. So, lock in your funds for a chosen tenure at a predetermined FD rate and build your wealth.
See the table below to understand some of the prevailing NBFC and bank FD rates.
|Issuer||Interest rates for Non-Senior Citizens (% p.a.)||Interest rates for Senior Citizens (% p.a.)|
|State Bank of India||3-6.25% p.a.||3.50-7.25% p.a.|
|PNB Housing Finance||6.80-7.55% p.a.||7.05-7.8% p.a.|
|Mahindra Finance||6.25-8.55% p.a.||6.50-8.80% p.a.|
|Bajaj Finance||6.80-7.70% p.a.||7.05-7.95% p.a.|
|Axis Bank||3.50-6.50% p.a.||3.50-7.25% p.a.|
|Canara Bank||3.25-7.19% p.a.||3.25-7.71% p.a.|
Disclaimer: The rates mentioned above are subject to change as per the issuer’s policies.
The table should give you an idea of the existing NBFC and bank FD rates and the smarter option to pick. Ideally, when it comes to an FD, investing a larger corpus is better. For instance, with a ₹1 Crore FD, interest per month, based on your payout mode, is generally quite high.
Here is a table to help you understand how much interest you can earn monthly by investing in a ₹1 Crore FD with varying issuers.
|Issuer||Interest rate||Monthly Interest Earnings|
|Bajaj Finance Ltd||7.49%||₹62,416|
|Punjab National Bank||4.30%||₹35,833|
|PNB Housing Finance||7.30%||₹60,833|
Disclaimer: The results mentioned are indicative and can vary based on the terms of investment.
There are many important reasons to save money, and working toward your financial independence is one. The best way to go about this is to spend wisely and invest your money in safe avenues like FDs.