Financial Planning: Importance of saving and investment
Saving money is one such life skill that we should all have because it helps us become financially independent and provides us with a number of rewards throughout our lives. We all understand the need to save money, but most of us find it difficult to do so because the thought of saving money doesn't give us the same sense of fulfilment as spending.
To put it simply, saving is essentially laying money aside for upcoming expenses or purchases. Saving, from an economic perspective, means reducing your consumption now in order to increase it later. But in addition to being debt-free and enjoying financial independence, having a safety net of savings provides many other advantages. Let's look at the reasons behind the importance of saving and investment.
Prepares you for retirement
Those who begin investing early for the future may be able to retire sooner. It could seem absurd to consider retirement when you're young. But at some point in life, everyone hopes to retire. You must begin saving money today if you want to live blissfully and stress-free then. Many retirees who rely on pensions typically don't have enough to cover all of their expenses; as a result, developing a habit of setting aside a portion of your income over time might build up into a retirement fund, making your retirement more pleasant.
Every day, we all face unforeseen costs arising from a health crisis, car difficulty, home repair, or even a family event. You will be able to handle these unplanned expenses more efficiently if you have some funds in your bank account. Therefore, it is usually preferable to be ready for these costs and to have some money on hand as a backup.
Instead of borrowing from friends or family when unforeseen circumstances arise, it's better to have some money saved up that you can utilize in case of an emergency. Regularly building an emergency fund can also aid in budget maintenance and monthly expenditure control.
For the majority of people, being wealthy implies having sufficient money and income to rely on. Being autonomous and free to act as you like at any time is one of life's greatest pleasures. This could be taking vacations whenever you want, quitting your job and returning to school to pursue a different career, accepting a job that is more personally fulfilling than financially rewarding, or starting your own business. However, the less independent you are, the less money you will have saved and the more debt you will have. Therefore, saving is a necessity if you want to be financially independent.
Buying a house is an important financial decision a person can make. Even if you intend to borrow money to buy a house, you will still need to put some money as a down payment. Banks won't consider loaning you the remaining money until you have saved up this amount, which can range from 10% to 20% of the total purchase price. Only if you have enough money in savings will you be able to pay for this. Additionally, if you can pay all or a portion of the cost yourself, you will save a lot on the interest rate on the mortgage and can use that money for relocating, repairs, or decorating.
Fulfilling your dream of travelling Travelling helps you discover new foods and cultures while also relieving stress. The majority of us desire to travel, yet a trip to the US, Australia, or Europe can cost several lakhs of rupees. It may be much more expensive if you enjoy staying in five-star hotels or travelling frequently. Therefore, you can start saving money before you go on a trip. If you already know where you're going, it's important to budget for your trip and estimate how much it will cost.
