Parents must inculcate the habit of saving money in children from a very young age. However, it is seen in most cases that possessing mere theoretical knowledge is not enough. Practical experience plays an important role to instil the habit of saving and investment. Starting to save early helps them learn to manage their finances better in the future.
The consistency in savings is of utmost importance because the amount you end up saving, as a student, gives you the liberty to buy whatever you may want or need. Having money that you will have saved over time also gives you the freedom to choose from things you might have wished to buy for a very long time.
In contrast to the belief that savings and investment are only for the earning class, students should start investing because they don't have any financial burden to take care of yet. Starting timely gives you a longer duration to save. It is essential to know the goals before starting your investment journey, which helps to understand when, where, and how much to invest based upon your personal goals.
Now, you may hear the words, 'Corporate Fixed Deposit', for the first time - so, first, let's explain what a corporate FD means. A fixed deposit facility can either be offered by banks or NBFCs, and other corporates authorised to make such an issuance. The FDs issued by banks are called bank FDs, and those issued by other corporate houses are called corporate FDs.
It is observed that the fixed deposit interest rates of corporate fixed deposits are usually higher by 1-3% - when this difference is considered over the entire maturity period and on the sum invested, the resulting difference turns out to be significant. Sometimes, the interest rates offered by bank fixed deposits are so low that it becomes difficult to beat inflation. In India, where the inflation rate is high, investing in corporate fixed deposits makes more sense.
1. Create a Budget
Budget creation is the first step in starting the journey of savings. Keep a record of all your money and expenses. It gives you a prediction of future expenditures and helps you to manage the investments accordingly. After the budget is developed, it is equally essential to stick to it.
2. Cut short on expenses
Youngsters tend to spend a lot due to the constant supply of cash in hand. However, efforts should be made to cut down on the unnecessary expenses to save money and invest from where they can earn good returns, though not instantly but over some time.
3. Clarify basic concepts
Investing allows you to diversify your financial portfolio. Hence, learning more about the basic concepts gives you a broader knowledge of the scope to earn stable returns over a long period and benefit from the power of compounding.
4. Choose the low-risk investment options
It might seem very interesting to invest in high-return instruments. Nevertheless, these instruments carry high risk as well. Investing in stock markets and mutual funds involves high risk and volatility and should be considered only after good study and proper guidance. However, students can consider saving in low-risk instruments like Fixed Deposit, Recurring Deposit, and CDs.
5. Calculate the risks and returns in advance
Calculation is a very crucial factor in investing. It helps in assessing different instruments based on risks and returns involved. Since risks and returns have a positive relationship and go hand in hand, higher risk implies high returns, and lower risk implies low returns.
6. Conduct background research
Background research of the companies that one plans to invest in is very much necessary. Though the past performance will not tell future performance entirely, it will indicate the future curve.
7. Set goals
You must know the goal towards which you are planning to save up. Suppose you, as a student, dream of buying a vehicle after two years. Since you have a clear picture of the goal and the amount you might need, you can look forward to investing in short-term instruments that yield enough interest to fulfill your need and are readily available when needed.
Although several instruments are available to start your investment journey and induce the habit of saving, students must go for the low-risk options providing good returns, such as the Recurring Deposit Scheme.
Advantages of Recurring Deposit
Recurring Deposit is a profitable option for students as they do not have to invest a lump sum amount at a single time. It has the following advantages:
1. The investment is divided into equal installments made over some time. It creates a habit of saving and hence reduces unnecessary expenses.
2. The interest earned, along with the principal returned to the time of maturity, can be used to finance short-term needs, including buying a vehicle, going on a vacation, paying tuition fees, etc.
3. You can begin your investment in recurring deposits with an amount as low as Rs 1000/- per month.
4. Contrary to investment in mutual funds and stock markets, recurring deposits are free from market fluctuations. The interest and principal are returned at the time of maturity.
5. The Recurring Deposit Interest Rate does not change and is determined well in advance. Hence, there are no interest rate fluctuations.
6. Almost all banks nowadays provide the recurring deposit service online. One can open, deposit, close, or view transactions online from the comfort of their homes.
The habit of saving since early years can help you save a significant amount of money over a long period. Although there are many options available, you should choose the best investment scheme based on your risk-taking capacity, your future goals, and the duration of the investment. However, you must not get carried away after a brief spell of success; instead, you should aim to be consistent. Ideally, to start with, students can choose to open a Recurring Deposit and invest a dedicated amount throughout the specified period.
Shriram Finance Recurring Deposit is a term deposit that allows you to make regular deposits and earn the best returns for the investment. Just like Fixed Deposit, Recurring Deposit also lets you earn the approved rate of interest from the date of investment till maturity. Shriram Finance Recurring Deposit Plan offers high returns, flexible tenure, and flexible pay-outs with a lucrative interest rate of 8.50%* p.a. . Shriram Finance was incorporated in 1986, and it comes with an unchallenged trust in the Indian market. Shriram Finance Recurring Deposit tenure ranges from 12 months to 60 months to finance all your short to medium-term needs. The Shriram Finance RD comes with a "MAA+/ with Stable Outlook" rating by ICRA. Shriram Finance RD Minimum Investment starts from Rs 500/-.