A penny saved is a penny earned goes the famous saying. So if you start your savings plan today, you can save those precious pennies which are the price you may pay for procrastination.
The significance of saving money for a rainy day is one of the most essential traits of well oriented financial living. So if you have ways to start it small and reap big, why should you say ‘tomorrow’?
Let us look at some ways to start small savings with ease. Hope these easy-to-buy bits will help both beginners who just started earning as well as others who can stretch their expenses a bit.
- Start an RD: Recurring deposits offered by all banks are wonderful small savings instrument that assures a fixed return at the end of the tenure. Depending on the excess money availability from your salary, after your expenses and other liabilities, you can start a long term RD with just Rs.500/- or Rs.1000/- or any of its multiples. Recurring deposits are available with all private and public sector banks. RDs ensure the same interest rates, as that of FDs and the advantage is that you need not wait till you accumulate a good chunk to start an RD.
For example, you start an RD with your bank by giving a standing instruction for debiting Rs.5000/- from your savings account every month. If the preferred tenure is 5 years, and your bank offers 7.5% interest, by the end of 5 years tenure, you get Rs.3,22,500/-.
- Mutual Fund SIPs: Investing in mutual funds using a systematic investment plan is another great saving scheme for small investors. Investors can choose to pay a monthly fixed amount towards mutual funds in both debt and equity linked mutual funds. A systematic investment plan is a great way to earn high returns as compared to any other small investment schemes.
For example, if you choose a good fund with more equity exposure, around 12% to 16% returns annually are guaranteed as per the past performances of good funds. Returns can even go beyond this. However, the success of mutual fund investment depends upon the company and fund you choose. Good companies have not yet disheartened any long term investors.
- Post Office Recurring Deposit (PORD): The Post Office Recurring Deposit (PORD) is a systematic savings plan made specifically for the small savings. Post Office Recurring Deposit is available for all Indian residents including a minor above the age of 10 years. The minimum investment made under the Post Office Recurring Deposit scheme is RS. 10 while there is no upper limit. The tenure of the Post Office Recurring Deposit scheme is 60 months or 5 years offering an interest rate of 8.5% compounded every quarter. The capital in the PORD is completely protected as the scheme is backed by the government of India, making it totally risk-free with guaranteed returns.
For example, you start a post office RD with another Rs.5000/- every month. If the preferred tenure is 5 years, and your bank offers 8.5% interest, by the end of 5 years tenure, you get Rs.3,25,500/-.
- Chit Funds: Chit Funds of government backed organizations are good and safe financial tools to start with as a small savings plan.Here the investors can start investing small amount, as per an agreement with a guaranteed return of invested amount. The money invested by each subscriber goes to a pool, from which lots are drawn every month to determine the person who will receive the funds each month. The fund thus received can be invested as an FD with the same company. While chit funds are a good way for small investors to raise money, there are a number of fraud cases reported over the years as fraudsters have been using chit funds to collect money from innocent investors and duping them of their hard earned money. So if you are planning to invest in chitfunds, ensure that you invest in government backed companies only.
For example, you subscribe for a 50 months investment plan with an approx EMI of Rs.7500-9000 a month (depending on the auction each month). At the end of the tenure, you gets a guaranteed return is Rs.475000/-. You can get this amount beforehand also, by participating in the monthly auction. The returned amount can also be invested in safe FDs with the same company at a guaranteed return of 9% interest.
- Kisan Vikas Patra: With the re-launch of Kisan Vikas Patra by the government last month, yet another safe small saving instrument is opened for the investors of all range. As per Kisan Vikas Patra scheme, the amount invested will be doubled in 100 months, (around 8.67% returns). And anyone can start it with amount as low as Rs.1000/- .
For example, if you can spare Rs.10,000/- a month for the 10 months, you can invest the same in Kisan Vikas Patra each month. As each investment is treated as separate funds, there are no restrictions on date or amount of investment. After the end of 100 months after the first invested month, you start earning Rs.20,000/- a month for the next 10 months, without any efforts!
Do you feel small savings inculcate the needed discipline that is needed to help save a bigger corpus or make bigger investments? Share your thoughts! We would love to hear from you!