Did you have a piggy bank while growing up? The one in which you could deposit small sums of money given as gifts on festival days by your favorite aunts and uncles. Your proud father would give you a small reward whenever you finished first in a test, and you would treasure and keep it. These small savings in the piggy bank would one day come in handy to buy something precious, with your own money!
One of the first golden rules of money management is to save regularly. Money saved is money earned. Not everybody can get massive pay hikes year on year. However, both getting a pay raise of ten percent and saving ten percent of your current income have the same effect on your finances. Getting a super hike is not entirely in your hands, but saving is something that you can do. Therefore, start right now with small savings. The pointers given below may help you develop a saving habit.
You can read: How Saving Money Becomes Easy With The Help of Community?
Start Your Savings Journey With The Help of a Community
Do Small Savings Matter?
The simple answer to this is Yes, they matter very much. There is a popular mathematical principle that can be quoted as reference to highlight the importance of small savings.
The development of a saving habit has a significant hidden advantage. It is the critically important characteristic of self-denial and financial discipline. At the point when you figure out how to say NO to some unnecessary/avoidable cost and save the money instead, that is a major step towards self-improvement and development.
Various Types Of Small Savings
There are 3 ways in which investors can plough in their small savings over regular periods of time. Most of them are monthly installment schemes, some have a yearly cycle.
1.Government Small Savings Schemes
This is the most popular investment option among Indian citizens. Some of them have a yearly cycle, while others have monthly installment plans. PPF, Sukanya Samruddhi Yojana, Post Office Recurring Deposits, and other schemes run by the Indian government require low monthly or annual contributions. Under Section 80C, these plans give you the added benefit of getting an income tax deduction up to Rs. 1,50,000. These plans also have reasonable interest rates, anywhere from 5.5-7.5%. Because they are programs run by the Central Government, they are safe.
The downside to this investment route is the continuously dropping interest rates, and thus the returns are bound to be less attractive with passing years. And the lack of liquidity of your funds as they are locked in the schemes for fixed durations.
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2.Systematic Investment Plans (SIPs) for Mutual Funds
It’s always hard to know when to get into the stock market, whether to do so when they’re going up or down. The SIP approach is the most effective way to balance the risks associated with equity investments. Depending on the size of your SIP payment, the MF plan of your choice will continue to accumulate MF units monthly in small amounts. You can sell only the required number of units at the current market rates if you want to get your money back. Market returns for MFs from reputable fund houses range from 8 to 14 percent, depending on market conditions.
However, the stock market’s greatest disadvantage is the inherent risk. Your investment is subject to market risk, and there is no assurance of returns.
Read: Which Is the Best Investment Option for Salaried People In India?
3. Public Provident Fund/ Employee Provident Fund (PPF/EPF)
Public Provident Fund is a statutory scheme by the Central Government, meant for both salaried and self-employed individuals. The motive of this scheme was to offer old age financial security to self-employed individuals and workers from unorganized sectors. You can open a PPF account with any post office or authorised bank and start investing in it with as low as Rs. 500 per year to earn guaranteed, tax-free returns. A PPF account has a minimum lock-in period of 15 years.
On the other hand, the Employee Provident Fund is a financial help for retirement planned for salaried employees. It is a fund in which both the employee and the employer contribute 12 per cent (or the minimum of Rs 780) of the employee’s basic salary amount every month.
Both PPF and EPF are eligible for tax exemption under Section 80C, which means there is no tax deduction on the maturity amount. This is a must-have investment option for salaried person in private sectors.
Finding It Difficult To Save Alone? Join the Community of Money Savers !
4. The Money Club
The Money Club platform is another model for small savings. It is the first ever social network dedicated to helping members earn money, save money and support one another financially. They are, in fact, a tool for regular monthly savings with the added benefit that depositors can withdraw their entire investment at any time during the investment tenure when they need it. There are no costs or hassles.
Saving money can be tough on your own, but with the support of a community, it becomes a lot easier. When you surround yourself with like-minded individuals who are also committed to managing their finances, you’ll find that you’re more motivated.
Benefits of Small Savings With Money Club
- You save for sure
It creates a mechanism where you are forced to save. Instead of keeping the money idle in bank accounts, individuals save and rotate money among themselves.
- You get hassle free loans when you really need it
Users bid their interest rates that start as low as 1% of the pooled in amount. Comparing it with the interest charged by banks over personal loans that are 15% p.a, we have seen that individuals pick up money at very low interest. Till date the interest paid by the net borrowers on The Money club is only 1/3rd to 1/4th of what they would have paid to the banks. The greatest advantage is that you can borrow a sum several times greater than the amount you have invested that too within 6-8 hours after bidding.
- You form a financially trusted community that helps each other
Helps you a build financially trusted community you can roll back to- at the time of financial emergencies. You save your ego and will never need to ask for favors again!
- You make higher risk adjusted returns
Returns are directly proportional to the risk you take. Every asset class (Stocks, Mutual funds, etc) has an inherent risk. So does your trusted group. However the risk you place in your trusted group is much lower than the uncertainties in the stock market. Isn’t it easier to know how our trusted network will behave versus how a particular stock is going to behave tomorrow. Therefore, trusted groups are less riskier than stocks!
- Safe and transparent
All transactions are digital. Members of the club deposit funds into your bank account directly. The money does not lie with the organizer.
- You can also earn extra money
You can earn money from home. If you sign up to be a Money Club agent and recommend the Money Club App to 20 of your friends and family, you could win Rs 20,000
Read: Best Guaranteed Monthly Income Plans: 10 Monthly Income Schemes
The Best Saving Plans & Schemes in India