If you are looking for “How To Save Money In India” and want to put them to grow.
Then you are on the right page!
If you expect that this article will make you a millionaire without hard-working, without earning or saving anything then you are in the wrong place.
But if you are like those people who are disciplined and can save at least Rs.500/- per month then today by the end of this article you will know exactly how to save money in India.
So it doesn’t matter if you can save Rs.500, Rs.1000, or Rs.10,000 per month because in today’s article we are going to discuss
- The top 5 investment options.
- How to pick the best investment option according to you.
But most importantly, towards the end, I’ll give you a Bonus Tip which is the number one rule to make your money grow.
Now let’s check in detail how we can grow our money in India.
Also Read:- How To Earn Money Online With Google.
How To Save Money In India Analysis.
This is the most important question for a common Indian middle-class person “how to save money in India”.
The best way to save your money is to invest your money in the right place.
To really understand what will happen to your money, let’s analyze each investment option based on these 3 parameters.
1. Liquidity: Suppose you have an emergency and need money right away. How easily can you get your money back from that investment is called liquidity.
2. Risk: It is the possibility that you’ll lose your money.
3. Returns: i.e how much can your money grow.
Let me give you an example. All of us like to save money in the form of cash. Cash’s liquidity is high because when you need it, it’s right there.
The risk is low. It’s not zero because somebody can still steal your cash. And returns are negative.
See, if you leave your cash in your locker or under your mattress then it is not going to grow.
Prices of items will increase, inflation will happen but your cash will remain the same which is why returns of cash are negative.
I hope now you understand why we need to check these parameters before the investment decision.
Based on these parameters, you need to take your investment decision to grow your money.
Also Read:- Work From Home Scams In India.
Best Way To Save And Grow Money In India.
If you really want to save your money and put it to grow then you have 5 investment options.
Which helps you to grow your money.
- Saving Account
- Fixed Deposit
- Health Insurance
- Stock Market
- Mutual Funds
These 5 options are the best way to save and grow money in India.
Now Let’s analyze all the 5 investment options with bits of help of Liquidity, Risk, and Return parameters.
Let’s analyze to identify which is the best option for you to save your money.
A savings account is a basic bank account that allows you to deposit money and withdraw money all while earning interest.
It is very easy to withdraw money from a bank but because of that, we often get tempted to spend which is why with a savings account, long-term investments become a challenge.
Liquidity is high because you can take out your money any time you want.
But every bank has a set number of financial transactions you can do per day. Risk is zero.
Your money is safe with the bank if you pick a trusted bank. But returns are low.
SBI gives an interest rate of 3.25% to 3.5% on Savings Account.
Now, how to invest? Just chose a bank that you like or trust the most, walk into their branch that’s near you and they’ll help you open your Savings Account.
A Fixed Deposit is when you give a certain amount to a bank for a fixed period.
i.e I am not going to touch this money until this period ends and in return, you will get a higher interest rate than a regular savings account.
For example, SBI FD interest rates range between 4.5% to 6.25%, depending on how long are you giving your money.
Are you giving it for 7 days, 3 years, or 10 years? Higher the tenure, the higher the interest you will get.
Now coming to the parameters. Liquidity is medium because some banks don’t allow you to liquidate your FD online.
Plus, if you withdraw your money before your maturity ends then you have to pay a penalty fee.
Risk is zero. The bank has to return all of your money after your maturity ends along with the interest.
Returns are low. It is between 4.5% to 7% depending on the bank and how long are you giving your money for.
But the main problem with FDs is tracking.
Suppose, one month you can save Rs. 1000/- and another month you can save Rs. 2000/- then you have to start 2 new FDs.
So every time you save, you have to start a new FD and it becomes difficult to track all of these FDs.
But to tackle this problem, we have something called Recurring Deposit.
Suppose you can save Rs. 3000/- per month. So, Rs. 3000/- every month will go to that deposit.
So there is just one Recurring Deposit that you need to maintain.
But again, if you miss your monthly installments with Recurring Deposit then you will need to pay a penalty fee.
Even though your money will be safe, the problem with FDs is the penalties you have to pay if you withdraw your amount before maturity or if you miss your monthly installments.
Now, how to invest? If you are okay with these drawbacks then all you need to do to set up an FD is to use net banking or just walk into your bank branch.
This is not a typical investment option, but it kinda is. Here’s how. Life is unpredictable.
Tomorrow, if God-forbid you meet with an accident or are recovering from an ailment then the hospital bills are going to be crazy.
In such a scenario, you don’t want to beg for money and spend the rest of your life in debt which is why health insurance becomes very important.
The risk is zero and the returns are enormous because it can save your life or it can save you from debt.
All you have to do is pay Rs. 4000/- to Rs. 8000/- every year and in return, you will be insured a sum of Rs. 2-5 Lakh to pay your medical bills depending on the policy you take.
Now, how to invest? There are multiple websites like PolicyBazaar, Coverfox, etc… that will help you compare health insurance.
So that you pick the best health insurance according to you.
All you have to do is call the executive and they’ll come to your office or your house to get the registration done.
Maybe the share you buy will become Mutibagger stock in the future.
We just discussed that the Stock Market is a one-person show where you have to make all the decisions.
But Mutual Fund is teamwork because a Mutual Fund collects money from people like us. Rs. 500/- from me, Rs. 500/- from you and creates a money pool.
A fund manager then uses this pool to invest in stocks, bonds, and other assets.
We don’t have to worry about where it is being invested because the fund manager takes care of all of it for a commission of 0.05% to 2%.
You can invest in it one-time or start a SIP (Systematic Investment Plan) where you can transfer a fixed amount to the mutual fund every week, every month, or every quarter…your wish.
If you want to make some extra return you can refer to our article Best Date For SIP Investment.
There are a whole lot of mutual funds. Some are good for short-term investments and some are good for long-term investments.
This is why the liquidity ranges from medium to high because in general, it will take 1-3 business days for you to get your money back.
But if you invest in Liquid Mutual Funds then you will get your money back instantly.
Risk. Mutual Funds are subject to market risk, please read the offer document carefully before investing.
There is a little bit of risk associated with Mutual Funds but as long as you do your research, you should be fine.
And returns are medium. On average in the past returns have been between 7% to 14%.
Now let’s take look at what is a Liquid Mutual Fund. A Liquid Fund is a low-risk, medium-return Mutual Fund that does not invest in high-risk shares but low-risk bonds or debt securities.
One such example is the ICICI Prudential Liquid Fund which has been around for the past 13 years and has earned close to 7.2% p.a in returns which are slightly more than the returns of an FD.
To date, for the past 13 years, it has lost money only in 2 days, and hence it is not very risky.
So, if you don’t want to take too much risk that comes with a Mutual Fund, don’t want to pay the penalties of an FD or an RD.
Also Read:- Best Mutual Funds To Invest In For Long Term
My Personal Opinion On “How To Save Money In India”
We just discussed 5 investment options. How soon do you need your money back will help you decide which of these 5 investment options is best for you.
But in my personal opinion, you should not keep all of your eggs in one basket which is why you can divide your investments like this.
So, first in your Savings Account you can keep around 20K – 50K INR for your monthly expenses and keep some liquid cash handy.
Next, maintain an emergency fund which is 2-3 months of your salary.
For your emergency fund, chose a low-risk medium-return investment option.
So you can either chose an FD or liquid mutual fund if you don’t want to pay any missed penalties and want an instant withdrawal.
You can even use it for any short-term investments. After this, if you still have money to invest then chose a Mutual Fund that offers high returns at high risk or invests in the Stock Market.
In this 3rd category, you should only invest money that you don’t need immediately and are okay to be invested in for the long-term.
This is just a suggestion. Ultimately, you will only decide what you want to do with your money.
But remember, with time and age our requirements will keep changing.
So, ensure that you review and adjust your savings say once a year to meet your goals.
You’ve read this article so far, which means you’ve invested your time in me, which means you like me?
So today’s Bonus Tip is this. Don’t make instant buying decisions.
If you have to spend then instead of spending your money on materialistic things that give you momentary happiness,
Spend on things that make you grow like that coding course, public-speaking club membership, traveling, or just a good book that teaches you something.
Because investing in yourself is just like investing in Mutual Funds or Stock Market. Long-term, they’ll always give you returns.
I seriously need a break. So the next thing I am saving for is a vacation to a cool place because I believe that every vacation is an investment.
Comment and tell me what you are saving for… Education, a camera, or your own house?
I’ll be waiting to read your comments. Also, share this article with people you know who have no money left at the end of every month. So that even they start investing.
I hope this article will help you to know how to save money in India for your future. If anyone has any queries or suggestions regarding investment then please ask in the comment box.Gashik
Great tips. I really made a good amount from mutual funds & stock markets. Though it’s a disciplined approach that needs to be followed.