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Savings

What's a want, and what's a need

Just imagine, you had an endless supply of wealth. Of course, that thought has crossed your mind! Anyway, what would you buy? The smashing new gaming console?

Or perhaps the multifunctional camera drone?

Oh wait! You've heard rave reviews about the next-generation virtual reality gaming headset. Now that's a must!

But what if you were told you already have two sneakers in excellent condition? Would 'buying a new pair' still be considered a 'need'?

Probably not.

Indeed, the list would go on and on. But don’t’ worry; there are ways to ensure you are able to pay for them. You can start by SAVING.

Let's look at how you can start making small changes and transform them into big savings.

And understanding this difference would be your very first step towards saving.

Remember, saving does not mean holding tight to your purse strings. It means you ensure you have enough money set aside for your ‘needs’ before it is spent on your ‘wants’.

To which of the two categories would you assign 'buying a brand new pair of sneakers'?

Probably a 'need', right? Everyone needs a good pair of sneakers in their closet.

Your Action Plan: Create a list of things you 'need' and the ones you ‘want'. This will help you prioritise your expenses and ensure that your 'needs' are taken care of before you move ahead to your 'wants'.

Spend less than you earn

Let’s say you have just started receiving Rs. 1500 as pocket money each month. You buy a wireless headphone worth Rs. 1200 and set aside the balance amount of Rs. 300 as your savings.

Then your phone needs some urgent repairs. The guy at the mobile repair shop tells you that it will cost at least Rs. 2,500 to fix your phone.

The following month, you want to a sports jersey worth Rs. 1800. But wait! This would be Rs. 300 more than the pocket money you received that month.

With your savings almost empty, you may now need to borrow money from your parents or friends. This is what would happen if you keep digging into your savings every time you fall short of money.

Ah! But no worries, you’ve saved Rs. 300 last money. So, you can use it.

Your Action Plan: A good thumb rule is to save up a specific percentage of money every month from your pocket money and keep it aside in the event of an emergency

Awaken your inner Sherlock

Now you know you need to save, and save more than you can spend. But how do you know where to spend?

Your Action Plan: Take a look at your weekly expenses and start jotting them an expense diary. Think about all the things that you need money to spend during the week.

That requires some fine deduction skills.

It could be anything - School lunch? Pack of gum? Cola with friends?

Now, list them all – both big and small.

The thing is if you don’t know where your money is going, you won't be able to control it. And if you can't control your money, you will end up spending your savings on things you don't even need.

This practise will help you allocate more money for the things you ‘need’ and help you cut down you unnecessary expenses.

It's Budget Time

You must have noticed the change in your daily routine when it is time for an exam. While usually, you may lose track of how long you have been watching Naruto or playing Among Us, you don't take the same risk a day before the exam.

You even end up preparing a timetable to ensure you don’t spend more time than necessary on things that do not involve studying.

Your Action Plan: Start budgeting. It will help you be aware of your needs, wants and spending patterns. Also, list down how much you money you receive as pocket money, gifts or even salary if you are working.

Now, budgeting is basically doing the same for your finances. It is a timetable that highlights how much money you can spend on what's necessary and figure out ways to save more.

A good budget should answer the following questions -

How much money did you receive this month?

What are your expenses this month?

What are my priorities in terms of spending?

How much money should you set aside this month as savings?

It’s just like financial guru Dave Ramsay once said, "A budget is telling your money where to go instead of wondering where it went."

Now, to plan ahead, a good budgeting technique that you can follow is the 50/20/30 Rule.

Let’s look at where you can park your saved money

Save at home

By not carrying your saved money in your wallet and keeping it at home will ensure you save up quite a bit. It will help reduce your spending habits and assist you during emergencies.

While setting aside some money at home may be wise, it may not help you in the future. It’s because of something called inflation.

Can you open a Savings Account?

Well, if you are under the age of 18 then you cannot open and manage a Savings Account on your own. But your parents or your legal guardian can do it for you, until you turn 18.

So what's inflation?

A pair of jeans from your favourite brand that cost Rs 2,500 a year ago, probably costs Rs 3,500 now. That's a whopping Rs. 1000 extra!

Over a period of time, the cost of every product tends to increase. However, a Rs. 1,000 note in your wallet today will still be a Rs. 1,000 note after a year. Its value will not increase. This means for the same product, you may have to pay a higher price in the future. And that's inflation.

Opening a Savings Account is easy!

All you need to do:

  • Visit the bank’s website
  • Click to open a savings account
  • Fill the form and upload your documents

So, is there a way to grow your money too? Yes, there is. You can trust a bank with your money.

Open a Savings Account with a bank and deposit the money you have saved in the account. And you can withdraw your money whenever you need it. For every rupee you deposit in your bank account; the bank pays you a small percentage. That means, the more money you maintain in your Savings Account, the more interest you get. And your money will grow over a period of time.

So isn’t it better to keep your money in a bank Savings Account than at home?

Banks generally require the following documents to open a savings account with them.

They are:

  • Two latest passport size photographs
  • Proof of Date of Birth
  • Address and identity proof documents

Once the form and the documents are successfully uploaded, the bank will make a video call to complete the Know Your Customer [KYC] process.

Or you can visit the bank branch and personally submit the documents to open your Savings Account.