Earning money is difficult these days, but saving money has become even more difficult in today's world. Youngsters in India often crib about not being able to save money in a fixed deposit scheme since their expenses are too much. As Ric Edelman, author of The Truth About Money, said, "Don't blame your income for the fact that you are not saving money." You can save money even with a meagre salary and invest it in any asset class, and this is how investment for future saving starts.
This first part of this blog covers some of the unique ways of saving money. And the second part will explain low-risk financial products like fixed deposits, recurring deposits etc., to invest the money that you have saved. As the first rule of investment for beginners, to invest money in any asset class, you need to first have some money, thus start saving. One caveat upfront before we start is that financial success is a time-consuming process, even if you invest in the best saving schemes. Thus, you need to have the patience to see your savings multiply. Now, let's get started to answer the question of How do I start saving? Here it goes:
- Make a Shopping List: When you plan to buy clothes or groceries, make a list of what you need. This will help you stay focused on only what you need instead of buying everything that appeals to you in a supermarket. The money you saved here can be the minimum fixed deposit amount that you can invest in a fixed or recurring deposit.
- Your Lifestyle Expenses: You don't have to book a cab or use public transport every time you go out or drive to the nearby shop, walk instead. You can wear jeans or shoes that are not the costliest, and drink a cheaper scotch. Save all this money and look for a high-interest rate fixed deposit to put your savings in it. A small amount saved on every transaction adds up to become an investment amount in your small investment scheme.
- Shop Online: Another crucial tip for investment for future savings is to shop online. There are multiple e-commerce sites in India that offer the best deals on anything you buy. It is usually cheaper when compared to buying the same thing from a physical store. Additionally, credit card cashback and other rewards are cherries on the cake. Besides, you are saving on fuel by not going out shopping. Pool all these savings to invest in different types of fixed deposit schemes
- Income Tax Deductions: There are many sections under the Income Tax Act in the likes of 80C, 80D, 80E, 80TTA to name a few. You can save money in income tax by claiming a rebate under these sections. Even many small investment schemes like PPF, ELSS, post office schemes fall under these sections against which you can take benefits. Claim HRA if you live in a rented house, take advantage of tax-saving asset classes like tax-saving fixed deposits, tax saver mutual funds, premium payment towards tax-deductible insurance, etc. Consult a Chartered Account and seek his advice on where and how you can save taxes.
- Avoid Incurring Debt: An important lesson in investment for beginners is to stay away from taking frequent loans. Millennials often swipe credit cards or take a loan to buy their favourite car. This comes at the cost of interest alongside the principal amount. Thus, you end up paying much more than what you borrowed initially. This interest amount can instead be invested in a fixed deposit scheme. This way, you will earn interest on your investment rather than pay interest on the loan. The bottom line is, only buy things that you can afford, and if you cannot, then prefer delaying this purchase.
- Decide your Financial Goals: Your financial goals could be saving money to buy a house 10 years from now, or higher education for your children after 15 years etc. Attach a timeline, and an amount to each goal and then use an online fixed deposit calculator to know the amount to invest in a fixed deposit plan and for how many years. You can refer to an online calculator by clicking here. Stick to these financial goals and plan your finances accordingly. This is a key takeaway from this blog and an answer to your question: How do I start saving?
- Multiple Sources of Income: Your employer can control your salary, but he cannot control your income. To save more money and invest in a fixed deposit scheme, prefer having an additional source of income. It could be from rental income on any residential or commercial property, working as a freelancer, taking online classes etc. There are always opportunities to make money, and you just have to find one to quickly accumulate the minimum fixed deposit amount
Financial Products to Invest
There are multiple asset classes or financial products to invest your savings in India, from gold to real estate and fixed deposits to equity shares. However, for someone from a small town with limited access to the internet, there are many low-risk decent returns financial products like fixed deposit schemes. Additionally, little understanding of complex financial products like equity, mutual funds, and ETFs makes them unfavourable and risky for investment for beginners.
Thus, such investors should go for financial products that carry low-risk and offer assured returns. Some of these products are fixed deposits, Government bonds (G-Sec), recurring deposits, high-interest savings bank account etc. Out of these less risky asset classes, a high-interest rate fixed deposit is ideal for an investor with a long-term horizon and thus the best investment for beginners.
The compounding effect (compound interest or, as Albert Einstein termed it as The Eighth Wonder of the World) also works best in the long term only. Thus, to taste financial success, it is advisable to start early and stay invested to witness your savings multiply. The compounding effect is one process that every investor should be well-versed with before making an investment for future saving.
There are multiple fixed deposit plans that are offered by both traditional banks and NBFCs. However, one should compare these plans across different institutions offering them to get the best deal. There are certain parameters on which you can compare different types of fixed deposit schemes, likes higher interest rate, lesser documentation, flexible tenor options, multiple interest payout options, premature withdrawal and nomination facility etc. The best saving scheme is one that has the most favourable terms and conditions based on your needs.
Fixed deposit schemes offered by NBFCs are slightly better than the ones offered by traditional banks. This is because these NBFCs tailor the fixed deposit to your requirements and offer superior rates of interest. At Shriram Finance Limited, we offer the best scheme with a minimum fixed deposit amount ₹5000. This coupled with high interest rates of up to 9.20%* p.a. , minimal paperwork, and flexible tenor options, differentiate us in small investment schemes. To read more about our fixed deposits, click here. We also have a fixed deposit calculator on our website that you can use for free to compute the returns on your investment. Allow us to serve you!!