Saving, especially household saving, is one of the most significant aspects of one’s life and earnings. While the older generation focused majorly on safer investment tools for saving money, such as Bank Deposits, PPF, Gold, RD, Savings Bonds, etc., today’s millennials are looking at savings from a different lens.
Having said that, with multiple saving options available today, most people get confused about where to safe and invest, and end up investing in the wrong asset classes.
Indraneel Chatterjee, Co-founder of RenewBuy, says consumers should look at creating a diversified investment portfolio for building their corpus and increasing their savings percentage.
He adds, “Safe investment options are majorly focused on Fixed Deposits, PPF, gold, recurring deposits etc; however, traditional investment channels are now replaced with innovative solutions, which are also leading to high returns. The systematic investment plan, mutual funds, peer to peer lending, stock markets, real estate etc. are some such investment tools.” Having said that, take note of the risk-reward ratio, and a financial advisor is always suggested in such scenarios to guide in the right direction.
Why should you increase your saving percentage?
While consumers save, experts point out they need to keep in mind that the rate of inflation will always keep increasing. Thus, the saving percentage should be targeted to fulfil their needs, desires, and requirements not only for the present circumstance but for years down the line.
Developing a habit of saving regularly is recommended, but just saving isn’t enough for any long-term goals. Saving a certain amount – around 10 to 20 per cent of one’s earnings in the bank or as cash is quite common in India. Either way, it does not benefit from the power of compounding, and one loses the opportunity to beat inflation.
It is crucial to start investing early and create a well-balanced diversified portfolio but doing only that will not beat inflation. Industry experts say it is especially important to have goal-based investments as it gives clarity to the individual, however, along with that one needs to increase their savings every year by at least 10-15 per cent so that the goals can be easily fulfilled, by beating inflation.
The earlier you start, the faster you unlock the returns of compounding. Hence, to fulfil long-term goals such as a child’s education, marriage, retirement or even health care expenses, experts say one needs to save aggressively during the early working age.
Along with that, experts say, investors should monitor their portfolio periodically and conduct a thorough review of their funds at least 2-3 times a year. This way you will find out if your funds are performing well, or if you need to reconsider certain investments.
It is also important to note that “while a person is saving, a substantial amount of money should be invested for insuring one’s life and family from any kind of unforeseen circumstance. Insurance is the key instrument that will help in safeguarding the wealth created in one’s life and meet specific milestones,” adds Chatterjee.