Most of the people do have a limited income. Even if a high earner(salary), we’re likely limited by how much we getting each month.
First and foremost, purpose of saving money is to protect you in the event of a financial emergency. Additionally, saving money can help you pay for large purchases, avoid debt, reduce your financial stress, leave a financial legacy, and provide you with a greater sense of financial freedom.
Why investing money is important?
Savings are typically for small financial objectives that can be met in short periods of time, like 1-3 years. If you’re looking forward to buy mobile phone or to go on a small domestic vacation in near future, saving might be a good option for such goals. On the other hand, investing is typically a long term plan for bigger financial goals. If you’re planning for your child’s education or wedding or your retirement which is due in about 5 or more years ahead from now, investing from now can make these goals achievable by the time of need.
Inflation eats up purchasing power.
When we talk about long term investment or saving then inflation must be discussed, if your Investment not able to beat the inflation this means you are losing your money. Inflation eats up your purchasing power, When you save money for the future, you hope it will be able to buy at least as much as it buys today, but it is not like that. During periods of high inflation, it’s reasonable to assume that things will be more expensive next year than they are today—so there’s an incentive to spend your money now instead of saving it. But you still need to invest money and keep cash on hand, even though inflation threatens to erode the value of your savings. You’ll need your monthly spending money in cash, and it’s also a good idea to keep emergency funds in a safe place like a bank or liquid funds.
If you want to create wealth from your savings, then you have to invest your money as per your goals, because no one becomes wealthy by saving in bank accounts. You can go for Mutual Funds, ETF, Stocks, FDs and property etc.
Mutual funds are best option for Investment even for new Investors. You should know the basics of mutual fund before investing in mutual fund. In mutual fund you can go for lump -sum Investment or Systematic Investment Plan. There are many types of mutual funds available choose as per your investment goal.
For example if you invest in mutual fund
It should not be a big deal for You to save and invest ₹5k a month, if you are 25 or old.
You do it for 20 years.
The total amount saved is ₹12L by the time you are 45.
If you invest ₹5k a month with 10% interest rate, by the time you turn 45, your total corpus would be more than ₹. 38L.
Amount Invested: ₹. 12L
Maturity Amount: ₹. 38L
Interest Gained: ₹. 26L