The first step toward becoming financially disciplined is to save money. Putting aside a portion of your monthly income allows you to deal with various financial crises and live a stress-free life. Developing the habit of saving early in your career will allow you to accumulate wealth over time and achieve various financial goals. In this article, we will discuss the top six benefits of saving and how to do so.

Top Benefits of Saving

Here are the top benefits of saving:

• Financial independence
  The primary benefit of saving money is financial freedom. You don't have to rely on your monthly income to maintain your lifestyle when you have sufficient funds at your disposal. You can plan a trip whenever you feel the need to get away from your hectic work life.
  
  Similarly, taking a major life decision like marriage or family expansion will be easy for you. Furthermore, you can plan for early retirement by saving a significant amount of money and investing it in various schemes such as retirement or saving plans. 
  
  
• Enjoying a debt-free life
  Debts are now a part of many people's lives, and you may be one of them. Whether you want to buy new furniture or a new dress, you may have a habit of using a credit card to pay for these expenses. But do know failing to pay credit card bills or loan EMIs has a number of negative consequences. It will have an impact on your future borrowing potential while also causing a variety of legal issues.
  
  However, if you have a habit of saving, you can deal with these extraneous expenses without the assistance of a loan. Since saving implies the accumulation of funds in the bank account, if you need a larger loan in the future, good balance maintenance will assist you in obtaining an affordable loan.
  
  
• Unforeseen expenses
  There are several types of expenses that you cannot predict in advance. However, when such expenses occur, they have the potential to put you in financial jeopardy. The most common one is a medical emergency. During a medical emergency, especially if it occurs at midnight, you will require immediate funds to cover hospitalisation costs, ICU expenses, and so on. Such costs are not insignificant, and depending on the disease and hospital, it could cost you a few Lakh.
  
  This is one of those situations where you will realise the importance of saving money.
  
  
• Serves as an income replacement 
  Layoffs have become all too common since the Covid-19 pandemic began. However, losing a job without prior notice is traumatic for both you and your family members who rely on your income. In such a case, if you are able to build up a sizable emergency fund over time, your savings could serve as a temporary income replacement. You can use them to pay for groceries, school fees for your children, and other necessities.
  
  Another situation where savings can assist is a temporary loss of income due to prolonged illness or severe accident causing temporary partial disability. 
  
  
• House purchase
  Purchasing your own home is a significant financial commitment. Given the rising cost of real estate, even a small one-bedroom flat would cost between ₹30 and ₹50 Lakh, and if you want to buy in a metropolitan area, just double this amount. If you believe you can easily cover the purchase price with a home loan, you may be overlooking the down payment cost.
  
  Before making a disbursement, the lender expects you to pay 20-25% of the property's value as a down payment. Paying for the same will be difficult if you do not have enough savings.
  
  Furthermore, savings enables you to pay for a house renovation, minor construction, and home decor without the need for a loan.
  
  
• Managing wedding expenses
  A lavish wedding necessitates a substantial sum of money. Even the most affordable ones cost between ₹30 Lakh and ₹40 Lakh. As a parent of a daughter, if you do not start saving for her wedding early on, the hefty venue and catering fees, as well as the soaring gold prices, will burn a hole in your pocket.
  
  
  

What are Some Effective Ways to Boost Your Savings?

Money is very important, and you should always look for ways to save it. We have compiled a list of the top four methods for increasing your savings rate.

• Budgeting: 
  Make a budget for every small and large expense and try to stick to it. When making a list of household and essential expenses, make sure you add life plan premiums, children's education fees, etc. Budgeting will assist you in identifying unnecessary expenses that can be cut to increase your savings.
  
  
• Avoid using credit cards:
  Credit cards are financial products that do not require you to pay interest on funds borrowed from them if they are paid on time. However, this feature may encourage you to overspend on unnecessary items such as shopping, outings, dining, and so on. Overspending with this card eventually leads to debt, making it difficult to save because you are required to pay a high-interest rate on the unpaid balance.
  
  
• Keep your expenses under check:
  One of the most effective ways to increase your savings rate is to reduce frivolous expenses. Create a tracker and add all your expenses from the previous month or week to it. It will notify you of a variety of miscellaneous expenses that are recurring in nature. It will also inform you of any costs that could have been avoided.
  
  
• Make an investment:
  Many people succeed in increasing their savings. But they do not make the best use of them. It is recommended that the money you save be invested in various schemes such as mutual funds, savings schemes, fixed deposits, and so on. It will assist you in accumulating wealth from funds sitting idle in your account.
  
  
• Buy a life insurance plan:
  Buying a life insurance plan will enable you to get tax* deductions on the premiums that you pay for the policy as per Section 80C of the Indian Income Tax* Act. Also, the maturity benefit is tax*-free, subject to the terms and conditions. Moreover, it will also keep your family financially secure when you are not there.
  
  
  

Conclusion

Saving is essential if you want to achieve financial stability. This habit assists you in dealing with various financial uncertainties and in meeting various short and long-term goals. You must also set aside a portion of your earnings for savings, retirement, and life insurance. If you are wondering where to look for the right plan, you can look at various Tata AIA Life Insurance policies and choose an option that is right for you.

L&C/Advt/2022/Aug/1998