ManageMyPaisa - Articles on Personal Financial Management and Taxes

The importance of savings in India cannot be underestimated. Parents inculcate the habit of saving in their child right from the time ,the child starts realizing some sense of his existence in this money driven world economy. This is evident from the fact that a mere 3 or 4 year old kid is persuaded to have a piggy bank. We are flooded with advertisements trying to capture the innocence of, tiny hands of a child putting in money in their invaluable piggy banks. The delight that a homemaker gets by saving a penny or two on vegetable she buys, after heavy dose of bargaining is unparalled.

Many of us lead a lifestyle that demands considerable time to be spent on meals with friends, after work drinks and sophisticated entertainment. It is often difficult to cut back on these things but the lifestyle we want to maintain require some sacrifice, i.e some amount of saving. Saving simply means setting aside part of income for future use. These can be done through notice saving, fixed deposit and other investment accounts at banks, post offices etc. There are always ways to keep hard earned money aside without feeling one is penny pitching. One doesn’t necessarily have to feel he is the only who has to turn down a fun night out in order to save some more amount.
In India the concept of financial management doesn’t really exist. Apart from relying on bank’s statements and a few people appointing financial managers, the concept is unexplored in India. Savings being is an essential component of financial management, in the west people who follow financial management religiously are able to keep a track of it in a more systematized and organized manner. Nonetheless the importance of savings in India is recognized like never before. This becomes apparent from the fact that October 30, is observed as’ world thrift day’. Many experts have also given theories regarding struggle of recession due to money being spent unwisely over the year, with little or no money in savings. Also about financial management we have more accessible options today with software like ‘ManageMyPaisa’ acting like personal financial manager. The popularity of these soft wares may mark the beginning of market of financial management in India.

Traditionally, people saved in short run because of provisioning for old age , for securing an emergency cushion in face of any unforeseen expenditure during a natural disaster, to repay debts and financing of education, wedding but off late conservatism is replaced by more risk bearing attitude of people .Today people are saving to finance their investment needs, for venturing on unexplored talents and earn huge potential in increasing money exponentially. Savings are also used for expansion of business ventures and to provide for flexible financial resources in the future.

The most encouraged form of budgeting is to channelize savings into a separate account, where one is tempted not to ‘spend just this month’. When it comes to emergency fund, most experts agree that one should put aside certain months of savings for a rainy day secure a mental peace for himself .The easiest way to start is by building small amounts. Smaller chunks are easy to stick to. Initially it may be difficult especially if one never has enough money but once one gets familiar, it no longer seems a herculean task. An alternative is ‘sinking fund’, i.e money left aside for future improvement on car, home or other possessions .It avoids the need for dipping in emergency fund each time.

Savings on a macro level may act as an engine for economic growth, specially saving which is channelized for investments. Theoretically higher the amount of savings, higher is the amount of investment. This reduces dependence of a nation on foreign direct investment. However savings needs to be absorbed productively. If savings are held under mattresses it is only ‘hoarding.

No matter how noble the intentions for saving are, saving goals should be attainable and consistent. Without characteristics of attainability, i.e something that can be obtained without doing something extraordinary and illegal and the characteristic of consistency, i.e changing goals from time to time according to the circumstances ,saving goals will one become a burden on a person’s finances without adding anything productively to his pocket. Hence while we need to focus on present incidents, we also need to take care of the original intention of saving and continue to do it unless we have gained enough leads to it.