If you don't make much money and are struggling to pay your bills, the idea of saving money or selecting one of the saving schemes may seem absurd. Why bother trying to save when you only have ₹1,000 left at the end of the month?
Because everyone has to start somewhere, and if you work hard enough, your financial situation will eventually improve. It is always worthwhile to put forth the effort to save money. It is critical to save money. It gives you financial security and freedom, as well as protection in the event of a financial emergency. You can live a stress-free life knowing that you will not be inconvenienced if events take an unexpected turn.
You can also ensure that your family is well-provided for by saving in a disciplined manner or opting for the right saving schemes. In the event of an emergency, your savings can provide a cushion for your loved ones, allowing them to overcome any financial difficulties.
What Are The Different Ways To Effectively Grow Your Savings?
The following are some important saving schemes that will help you build your wealth over time:
1. Fixed Deposit (FD)
Fixed deposit accounts are widely regarded as the most convenient and secure investment option available. You deposit any amount that is convenient for you for a set period of time, and you earn interest at the rate that was in effect at the time of deposit. This saving scheme provides flexibility in terms of tenure and interest payout frequency. An FD account pays a significantly higher rate of interest than a bank savings account or other saving schemes.
You can choose to break the FD or even take an overdraft loan on the FD if you need the money before the maturity date. You can also reinvest the interest to receive a larger lump sum at the end of the term. Interest is taxable, and payments over ₹40,000 may be subject to TDS.
2. Public Provident Fund (PPF)
The Public Provident Fund established the National Savings Institute in 1968 and is also considered one of the Best Investment Options in India. It is the safest and most popular savings option in India because it is backed by the government. The contribution to a PPF account qualifies for a tax deduction under section 80C of the Internal Revenue Code. This saving scheme pays up to a 7.6% annual interest rate, compounded annually. In a financial year, one can invest up to ₹1.5 lakhs with a minimum contribution of ₹500. PPF benefits are available in the form of a lump-sum payment or up to 12 deposits per financial year. Individuals can transfer their PPF account from one post office or bank to another, giving them more flexibility.
3. Employee Provident Fund (EPF)
EPF, which was established by the Employee Provident Fund Organization (EPFO), is one of the government-sponsored saving schemes in which all salaried employees are required to make an equal financial contribution to the Provident Fund (PF) account. Individuals can use the EPF fund to plan their retirement ahead of time so that they can enjoy their golden years stress-free. Furthermore, the EPF scheme assists individuals in achieving their financial goals in life as well as dealing with any type of emergency.
4. Recurring Deposit (RD)
A recurring deposit is yet another risk-averse investor's favorite saving scheme. Given the current market environment, investors are being more cautious, but you still can get interest rates as high as 5.8% to 7% if you are ready to invest in a 5-year RD.
5. Post Office Saving Schemes
India Post's various savings schemes are very popular because the risks are minimal and most of the saving schemes provide guaranteed returns. Opening any one of the Post Office Saving Schemes accounts at the post office is a simple and quick process. The schemes are also popular due to the numerous benefits they provide.
The following are some of India Post's savings plans:
- Senior Citizens Savings Scheme Account
- Sukanya Samriddhi Account
- National Savings Monthly Income Account
- Public Provident Fund Account
- Kisan Vikas Patra Account
- National Savings Recurring Deposit Account
- National Savings Certificate Account
- Post Office Savings Account
- National Savings Time Deposit Account
5. Mutual Funds
Mutual funds, as an asset or as one of the saving schemes, are long-term wealth creators for any portfolio. Mutual funds are a relatively risk-free way to invest in the stock market without taking on the same level of risk as trading individual stocks.
Investing in mutual funds has its own set of advantages, some of which are as follows:
- Low initial investment
- Handled by Professional managers
- Provides flexibility in terms of investment mode and liquidity.
- Provides a wide range of products based on risk profiles and investment goals.
SIP stands for Systematic Investment Plan, and it is a tool that helps people build wealth by investing small amounts of money at regular intervals over time. This not only smooths out the risks of market fluctuations but also offers better long-term returns than most other saving schemes.
The following are advantages of investing in Mutual Funds via SIP:
- A methodical approach to investing
- Achieving long-term financial objectives
- Averaging Rupee Costs
- The advantages of compounding
- Affordability and convenience
Note: Mutual fund investments are subject to market risk; carefully read all scheme-related documents before investing.