Hyderabad:Saving money can help you reach your goals, cover future expenses and minimise stress. World Savings Day is observed every year on October 30 in India in order to raise awareness about the importance of savings.
It was officially established as an observance on October 31, 1924, and is celebrated globally on the same date. However, in India, World Savings Day is observed a day earlier, on October 30.
History of World Savings Day
World Savings Day was first established in 1924 during the first International Savings Bank Congress. The meeting began on October 24 and ended on October 30 and on that day, the Congress decided to observe World Savings Day. The Congress decided to spread awareness about World Savings Day in schools, colleges, government and private offices. The aim was to create awareness and insist on the importance of saving through various modes.
In 1934, at the first International Savings Bank Congress, Filipo Ravizza – an Italian professor – proposed the idea of World Savings Day. This day and the awareness it raised gained more prominence and understanding between 1955 to 1970 as people started watching the horror of the two World Wars and became increasingly conscious about their financial security and savings.
What Are Savings?
Savings refers to the money that a person has left over after they minus their consumer spending from their disposable income over a given time period. Savings, therefore, represents a net surplus of funds for an individual or household after all expenses and obligations have been paid. Savings accounts are very safe but tend to offer very low rates of return as a result. Saving can be contrasted with investing, in that the latter involves seeking to grow wealth by putting money at risk. Negative savings is indicative of household debt or negative net worth.
Importance of Saving Money
Saving is important for securing an individual's financial well-being, achieving long-term goals and financial security. It also provides a sense of peace of mind. There is no right time to start saving, the earlier we start the better.
It helps in emergencies: Emergencies are always unexpected. Therefore, when they occur, the funds required are usually not part of your regular budget. There is often pressure to look for extra funds at very short notice such as funeral expenses, house repairs and even car repairs. Accumulated savings can often go a long way in alleviating these emergency situations.
Protects during sudden job loss: You may have a good job now, but what if you were to lose that job? Suddenly finding yourself unemployed can be frightening and traumatic, but it's something many people will experience at some point in their lives. Having savings in place to help cover your living expenses while you find a new job can provide you with peace of mind.
Helps finance during major life events:Whether you’re looking to buy a house or car, tie the knot or even start a family, many big life events can often carry a hefty price tag. For some of these, the thought of reaching for a credit card or taking out a personal loan is all too easy. However, using savings to help fund these things is a much better option than putting yourself in debt and having to repay the funds borrowed along with interest. Some of these, such as purchasing a property don’t allow for borrowed funds to be used anyway, so the money required will need to have been saved regardless.
Limits debt:Having some amount in savings can help to limit the amount of debt needed, as they can be used to finance certain expenses instead of using a credit card or personal loan. This will limit the requirement of further funds and will also allow you to save the amount that would have been spent on interest. Savings also help avoid the need to take out emergency loans when urgent situations occur, which often come with a higher interest rate.
Helps prepare for retirement:When you start the savings habit, it pays to think about the long-term, as well as what might be just around the corner. The state pension itself is unlikely to provide you with enough income to cover all your costs when you eventually stop work, particularly as the age at which you’ll be able to claim it is moving gradually further away, so the earlier you think about retirement planning the better. Making a habit of saving a small portion of your income over several years can accumulate into a substantial amount of retirement funds, which will help to make your retirement much more comfortable.
Saving Schemes in India
Savings schemes are investment options for Indian citizens launched by the government as well as other public sector financial institutions. These saving schemes were introduced as an incentive to cultivate healthy saving and investing habits in India. This is also a way to increase the inflow of money into the Indian economy.
Public Sector Schemes
Tax Saving Fixed Deposits
Tax-saving fixed deposits are suitable for investors looking for lower risk and a fixed and guaranteed return on a long-term basis. Deposit made is allowed as a deduction under Section 80C up to Rs 1.5 lakh. If you invest say Rs 50000, and your total income is taxed in the 20% tax slab rate, a deduction of Rs 10000 (Rs 50000 * 20%) will be allowed.
Unit Linked Insurance Plan (ULIP)
Unit Linked Insurance Plan (ULIP) is a combination of investment and insurance. In this plan insurance company puts a portion of the amount for life insurance and the rest of the portion in an equity-oriented mutual fund or debt-oriented mutual fund.
Equity Linked Savings Scheme (ELSS)
Equity Linked Savings Scheme (ELSS) is a type of mutual fund, with the shortest lock-in period of just 3 years, investing at least 80% of assets in equity (stocks) offering a higher compounding potential in the long term among other tax-saving schemes