When you were a child, did you have a piggy bank? One where you could deposit the modest amounts of money that your favourite aunts and uncles gave you as gifts during holidays. Your pleased father would give you a tiny gift when you finished first in your class on a test, and you would treasure and store it. One day, these meagre deposits in the piggy bank might be useful to spend your own money for a priceless item!
One of the fundamental principles of wise money management is to develop a money saving habit. Money savings equals earnings. Not everyone is eligible for significant pay increases every year. However, increasing your pay by 10% and increasing your savings by 10% of your current income both have the same impact on your financial situation. Money saving is something you can do, even while getting a fantastic hike is not fully in your control. So begin by doing so right away. Start saving little by little, and you might find the advice below helpful to develop the saving habit.
Multiple kinds of Money saving
Investors can invest their modest resources in one of three main ways on a consistent basis. Most of them have monthly payment plans, while a few have yearly cycles. Here are some ways to save money.
1. Government small-savings initiatives
Indian citizens favour this investment strategy the most. The Indian government offers a number of programmes, including PPF, Sukanya Samruddhi Yojana, Post Office Recurring Deposits, and others, that only require minimal monthly or annual contributions. These programmes also offer an income tax deduction under Section 80C up to a maximum of Rs. 150,000. These programmes provide respectable interest rates that range from 5.7% to 7.5%. The fact that they are Central Government programmes and have complete safety guarantees is the most significant feature.
The ongoing decline in interest rates is a drawback of this investment strategy, and it will inevitably make the profits less alluring over time. Additionally, because your money is locked in the schemes for predetermined periods of time, it lacks liquidity. This is one method of cost-cutting.
2. SIPs (Systematic Investment Plans) for mutual funds
Another way to save money is Systematic Investment Plan (SIP). SIP is an investment option provided by Mutual Funds that enables investors to invest a specified amount in a Mutual Fund scheme on a regular basis, such as once per month or once every three months, as opposed to doing so all at once. The instalment payment is akin to a recurring deposit and could be as small as INR 500 per month. It's convenient since you may direct your bank to automatically deduct the specified amount each month.
Because it fosters disciplined investing without regard for market volatility or market timing, SIP has gained favour among Indian MF investors. The ideal method to enter the world of investing for the long term is unquestionably through one of the systematic investment plans provided by mutual funds. It is crucial to invest for the long term, which means you should get started as soon as possible to optimise your final results. To get the most out of your assets, your motto should be Start Early, Invest Regularly.
Making the choice of whether to invest in the stock market while it is booming upward or when it is spiralling downward is never easy. Entering the market via a SIP is the greatest approach to manage your equity investment risks. Depending on the size of your SIP deposit, the MF scheme of your choice will continue to amass MF units in tiny amounts each month. You can only sell the necessary number of units at the going market pricing when you want your money back. Depending on the current market conditions, MFs from reputable fund houses are known to produce returns in the market between 8 and 14 percent.
The largest drawback of the stock market, though, is the inherent risk. Returns are not guaranteed, and there is market risk associated with your investment.
3. Chit funds
India's financial system has included the revolving savings programme known as "chit funds" for more than a century. Kuree, Chit, and Chitty are some of its other names. An excellent financial tool for saving and borrowing money is a chit fund. Chit finance provides a fair return on investment as a savings vehicle, and as a borrowing strategy, it can be a dependable source of funds for both routine and unplanned expenses.
The similar tiny savings approach is used by Chits Fund Schemes, which many of you may not be aware of. The fact that the depositor can withdraw their whole investment at any point throughout the investment period makes them a better option than ordinary monthly savings instruments. There are no fines or difficulties.
Choose a reputable registered Chit fund house, and you can expect to receive 7-9% returns on your investment with no risk at all.
4. Postal Savings Account
Any bank savings account is the same as a Post Office Savings Account. The annual interest rate for Post Office Savings Accounts is 4%. The minimum balance between the tenth and the end of the month is used to determine the interest rate. Additionally, the investor's account is credited with the interest at the conclusion of the fiscal year.
500 INR is the required minimum deposit to establish an account. However, there is no upper restriction on the total deposit amount. One account may be opened per person. A single account or a joint account may be opened by an individual. A guardian may open an account on behalf of a dependent adult or child. A youngster above the age of 10 may also open an account.
The smallest withdrawal is 50 Indian rupees. However, account holders must always keep a minimum balance of 500 INR. There will be a minimum balance fee of INR 100 charged by the post office. Additionally, the account will continue to be closed if the balance falls to zero.
There are no tax advantages to investing in post office savings accounts. Additionally, the interest income is taxed at the individual's tax bracket rates. The interest up to INR 10,000 is exempt from tax under Section 80TTA of the Income Tax Act, 1961.
Government Provident Fund (PPF)
The National Savings Institute introduced the Public Provident Fund, a post office savings programme, in 1968. It is one of the most well-liked investment strategies for tax savings. PPF requires a minimum annual investment of INR 500. Additionally, the annual maximum investment is INR 1,50,000. The PPF investment period is 15 years. For the current quarter, the interest rate on PPF is 7.1% yearly compounded (October to December 2022). At the beginning of each quarter, the Ministry of Finance determines the PPF interest rate.
Investors can make a single investment or a series of monthly instalments, but they cannot open more than one PPF account. Additionally, you can move your PPF account from one post office to another. The lock-in period for PPF investments is 15 years, although they can be extended by an additional 5 years. PPF and HUF investments are only available to Indian citizens; NRIs are not eligible to participate in this programme.
Under Section 80C of the Income Tax Act of 1961, investments in PPF are eligible for tax deductions. Investors who file income tax returns may obtain a tax exemption of up to INR 1,50,000. Additionally, both the interest income and the maturity sum are tax-exempt.
The significance of saving money
Everyone should save, regardless of income, consumption, or stage of life.Here are a few justifications for you to begin saving.
1. It provides comfort:
Knowing you have some money set aside for emergencies gives you peace of mind. You can live a stress-free existence by knowing that you won't have to suffer if circumstances take an unexpected turn.
2. It improves your future:
A lot of your goals may be accomplished by using your savings. You can get a car, buy a house, or put money away for retirement. You may secure your future and enjoy the most that life has to offer while still leading a very satisfying life.
3. It covers the cost of your kids' education:
You may support your children's goals and pay for the top universities and institutions around the world if you have a sizable sum of savings.
4. Plan your short-term objectives by:
Savings are not only intended for the future. You may also benefit from short-term financial planning. Many people take trips after saving money for a while.
5. It provides safety for your family in case of an unpleasant circumstance:
By engaging in disciplined saving, you may guarantee the financial security of your family. Your resources could provide your loved ones with a safety net through trying times and help them overcome any financial obstacles.
The benefits of participating in a small savings programme are as follows:
A saving behaviour:
By taking part in tiny savings plans, investors can constantly save little amounts of money. These investments have a long investment horizon and produce large earnings. Additionally, regularly setting aside a little sum of money helps reduce wasteful spending. Consequently, investing in one of the programmes fosters the habit of saving.
Security:
Putting money into one of the programmes such as Chit fund schemes will help you secure your future. Additionally, investing your money is usually a better idea than keeping it liquid. Furthermore, there is no chance of default because the Government of India is funding the majority of the projects.
Long-term advantages:
The investment horizon for the majority of small savings plans is greater than five years. Investments made over the long term have the potential to produce substantial returns. Additionally, many schemes use a compound interest calculation to determine their returns. Long-term investments that use compound interest provide substantial returns by earning interest on interest.
A pension fund
The long-term investments are appropriate for retirement savings. Regularly investing little amounts will aid in building a solid retirement fund.Additionally, starting early offers advantages; the benefits increase with the length of the term. As a result, retiring with ease and happiness is possible.
Savings on taxes
Investors can benefit from tax advantages in several small savings programmes. For instance, under Section 80C of the Income Tax Act of 1961, the investment made into the programme will be eligible for a tax deduction. Tax-free benefits apply to both the maturity amount and some of the interest.
Types of Chit Funds
Deposit Certificate Funds:
Chit funds that have been registered with the Registrar of Firms, Societies, and Chits are known as registered chit funds. These chit funds are governed by the Chit Funds Act, 1982, which the RBI has put into effect throughout all of India's states.
Unauthorised Chit Funds:
Investment tools: Unregistered chit fund schemes are savings plans run by friends, family, or coworkers. Compared to registered chit funds, this kind of chit fund is thought to be riskier.
Digital Online Chit Fund:
Chit finance have changed and are now organised online chit funds thanks to digitalization. Online auctions are available for several chit fund kinds. Online chit fund options are available to subscribers for both making their monthly contributions and cashing out their winnings. Each subscriber in this type is required to set up an online account via which they can control and distribute chit funds.
Organised Chit Funds:
These kinds of chit schemes, which are more prevalent in North India, call for all the participants to gather together once a month or once a week. All of the members' names are written on little paper slips and gathered in a box. In front of the entire group, the group leader takes a paper slip in their hands. The entire sum of money is awarded to the name chosen. The box is then empty of that name. Even though the member's name won't be chosen again at the following meeting, they still need to show up and pay their fair amount.
Chit for Specific Purpose:
Special purpose chit schemes are established to save for a certain goal. A group of neighbourhood women, for instance, could come together to plan a savings plan for Diwali sweets. There would be a deadline for this Diwali sweets fund, which is typically one week before Diwali. The money raised is put to use to prepare and purchase sweets in bulk. During Diwali, the prepared sweets are subsequently shared among all the family members. Special purpose chit funds minimise both the expense and the work.
The Top 9 Advantages of Chit Funds
Investment and saving tool:
You can benefit from both borrowing and saving with chit fund Business.
Quick money availability:
A chit fund schemes plan is simple to join, and by only making the initial payment, you have the option of borrowing the lump sum (the pot).
Less or no paperwork
It's an excellent tool for meeting peoples' financial needs without requiring them to provide paperwork like IT returns or PAN cards, etc.
No security:
The chit finance is provided on personal sureties, unlike banks and other financial institutions which demand actual security.
Having no questions:
You are not required to state why you are using the borrowed funds to chit fund Business.
An emergency fund:
The funds are simple to get your hands on in case of an emergency or unforeseen expense.
A significant dividend
The dividend paid to subscribers is significantly more than the interest earned on the funds invested in various deposit plans.
Low enthusiasm
The interest rate is set by the subscribers in concert and fluctuates from auction to auction. Additionally, compared to other forms of financing, borrowing from the chit fund has a cheaper interest rate.
Its versatility in application:
Your chit finance is available for any use you choose, including weddings, shopping, travel, paying for medical expenditures, attending religious events or festivals, paying for your kids' schooling, etc.
Navachethana chits now have a dominant position in the industry in the region with a 100+ crore annual revenue, more than 14000 subscribers, and a client retention rate of more than 50% thanks to our illustrious over two decades of experience in the field of chit funds and finance. In the key hubs, Navachethana chit fund company is continually growing despite having 7 branches throughout the state of Karnataka. Young, hardworking individuals are needed to run the branch offices in various cities. On June 17, 2009, we launched Navachethana Chits in Mangalore.
All of the directors have accumulated more than 20 years of professional experience working for the top Indian chit fund companies in the fields of finance management and chit funds. To protect investor funds, this chit fund company has developed a professional culture. To protect investors' hard-earned cash, this chit fund business has honed our risk management skills.
Navachethana chits is one of the most well-known chit fund companies, and this chit fund business is renowned for our happy customers and safe investments. Make contact with us to begin an investment plan. We will be happy to assist you in finding the best plan to suit your requirements. Along with chit funds, this chit fund business also offers microfinance to our current chit fund clients in 1-2 days, ranging from 50,000 to 10 lakhs with extremely simple documentation, such as emergency rapid gold loans, loans against LIC policies, and business loans.