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
National Pension Scheme (NPS)
The National Pension System is a savings scheme which aims at providing monthly income after the retirement of the investor. Here employees need to invest in NPS while they are employed. The entire accumulated throughout the duration of the scheme is broken down through an annuity plan and then paid out to the investor every month post-retirement.
Senior Citizen Saving Scheme (SCSS)
Senior Citizen Saving Scheme (SCSS) aims to provide a regular income for senior citizens aged above 60 years available at a certified bank and post offices across India.
Government Savings Schemes
Sukanya Samriddhi Yojana
The Sukanya Samriddhi Yojana is a government savings scheme created with the intention to benefit the girl child who is 10 years of age or younger. A parent or legal guardian can open a maximum of 2 accounts for 2 girl children. The account matures after 21 years of opening the account or in the event of the marriage of the girl child after she gains the age of 18 years.
Pradhan Mantri Vaya Vandhana Yojana (PMVVY)
Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a pension plan run by Life Insurance Corporation LIC for senior citizens aged a minimum of 60 years. An assured return of 8 per cent per annum is provided monthly (equivalent to 7.4 per cent per annum) for 10 years. However, the investor can choose a monthly/quarterly/ half-yearly or yearly payment of his pension.
Public Provident Fund
The Public provident fund or PPF is an investment option that has been extremely popular with Indians across generations. The major reason why PPF is considered a preferred choice can be attributed to it being a safe investment option. The interest rate is an attractive 7.1% PA and the invested amount can be claimed under Section 80C to lower your tax liability. Not only this, the interest earned on the invested amount is also exempt from tax.
National Savings Certificate
National Savings Certificate or NSC is a great investment option that comes with the advantage of tax saving. NSC can be obtained from any post office by Indian citizens. This investment option is a preferred choice of individuals who are looking for safer investment avenues as it is backed by the Government of India, consequently carrying a low risk.
Post Office Savings Schemes
Post office savings account can be considered as a regular savings account offering a slightly better rate of returns. It is safe as well as offers the flexibility of partial and complete withdrawal of invested amount at short notice for financial emergencies. Post office schemes include,
Post Office Savings Account(SB)
Public Provident Fund Account(PPF)
Senior Citizens Savings Scheme Account(SCSS)
Sukanya Samriddhi Account(SSA)
Kisan Vikas Patra(KVP)
Mahila Samman Savings Certificate
PM CARES for Children Scheme, 2021.
The importance of saving money is simple. It allows you to enjoy greater security in life. World Savings Day prompts individuals to reflect on their financial habits, encouraging them to learn about managing money and setting savings goals. By encouraging all members of society to save and invest, we contribute to a more equitable and prosperous future for everyone.
