You know the types of bank accounts you can open and operate, as explained in the first part of this series. Let's move on to the second part and learn about saving habits.
Good financial habits help you save money and make you financially secure.
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Savings and investment both are integral parts of financial planning.
Most of us treat savings and investments as a single financial instrument; however, the scope of both financial instruments varies.
The saving of money ends in spending and investing both, but investing money requires you to save first. So, investment relies on your savings, but savings have various uses.
We save money to invest in financial instruments that can generate substantial returns over the years so that our investment amount returns with interest and other growth benefits.
That's a good idea, but considering various financial instruments before investing your hard-earned money brings desired returns in the long term.
It's better to consider opportunity costs when making various financial or non-financial investments and decide.
Depending on your goals and time horizon, you can consider various financial instruments to save money.
Let's understand how to save and why saving money is important.
Saving money helps you to live happily without worrying about the future.
If any unwanted or sudden expenses arise, you have a buffer.
Saving money allows you to fulfill your dreams of traveling, buying a house, educating your children, buying luxurious lifestyle products, and retiring.
You can save money for medical emergencies as well. Medical insurance covers most emergencies, but it is better to save money for emergencies.
Most importantly, save today to invest money in securing your future.
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Saving is keeping aside a certain amount of money for emergency use or future expenses that may arise. That amount can vary depending on the time of saving money. Few save money weekly, daily, or monthly, and few save without any time frame in mind but save as and when they have an amount remaining higher than their expenses.
“Do not save what is left after spending, but spend what is left after saving”. – Warren Buffett
Cultivating a good money-saving habit takes time and effort. It becomes harder to save money as inflation costs and expenses have increased significantly recently. But on the positive side, a pay rise also contributes to increased savings rates.
Ways to save
Start with a small amount and make it a habit to save regularly.
Keep aside money or save some of it if you plan to spend unnecessary expenses on extravaganza.
Make a budget and plan accordingly to see if you meet the expected budget.
Create a plan for future purchases to be saved as early as possible.
Cultivate a habit to keep savings untouched even in emergencies. Consider the cumulative advantages of saving money early because time goes by and never returns.
“You don’t have to see the whole staircase, just take the first step.” – Martin Luther King, Jr.
Once you develop a momentum of saving money regularly, you will need a place to keep your hard-earned savings to keep it safely.
There may be thousands of ways to park your money safely, but you must consider which option suits you best for keeping your savings safe.
Safes or piggy banks suit for a small amount of initial savings. These options are handy and suitable to keep a small amount of savings at home.
Savings bank account: once you have some fixed amount or have already achieved a milestone to a desired amount of savings. You can park your savings into a bank account and earn interest on your savings.
Certificate of Deposits(CD): If you plan to keep your savings longer and not invest in other savings instruments, consider opening a CD with your bank and earning higher APY than a regular savings account.
Remember, the options we discussed here are for savings and not investment, as the investment time horizon is longer than the savings.
Trust those who are trustworthy for money advice.
Keep a little secrecy about your savings and investments.
Talk to your family often about savings and take their advice.
You don't need a specialized advisor to make a plan to save money.
Start saving money today and take the first step towards investing in your better future.
This part 2 is the second post in the 5-post series byThe Financial Weekly newsletter.
The Financial Weekly Newsletterwill come back with part 3 next Saturday.
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