It’s No Secret, You Can Be A Superstar If You Save Enough

31st October 2017
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Saving consistently is challenging for most individuals. But the fruits are just as sweet. If done correctly, it can lead to great success on the personal and professional fronts.

October 31st is World Savings Day

There is a good chance not many are aware of the importance of this day. For those who are already saving enough towards their financial goals, this is of course just another day.

Although it pioneered at a time (in 1924) when lower income individuals didn’t have access to basic banking, it’s as relevant today. May be even more now, when many find themselves in the vice-like grip of unabashed consumption.

Why is ‘savings’ a big deal?

Savings has implications at two levels – personal and economic. When we save money consistently, it helps us meet our personal and family goals like marriage, child’s education and retirement.

It also helps the economy over the long-term. Money saved by individuals in the bank, fixed deposits and mutual funds is effectively the capital used by companies and the government to spur economic growth. If this capital was not at hand, governments and corporates would have to borrow to meet capital requirements, thereby risking higher debt-servicing expenses.

Why save at all

While individuals belonging to another generation have seen the advantages of savings at various life stages, the younger lot could use a short primer on ‘why save’.

  • Inflation

Your salary or profits could be growing leading you to believe you don’t really need to save. What you can not see is that while money is growing it’s also depleting at the same time, thanks to inflation. Inflation is like the efficient assassin who fires from the darkest recesses, so no one sees him but he nonetheless finds his mark. To go one up on inflation, you need to grow your money by saving it faster than inflation can deplete it.

  • Aspiration and goals

We all need to save money for future goals and aspirations. A youth wants to get married some day and own his own house. The father wants to see his child getting the best degree. The middle-aged man wants to retire comfortably.
All these goals may seem far-fetched at first glance. But if you have a plan to achieve them by saving money consistently in avenues like life insurance, you set yourself up to achieve these goals. Else, they are reduced to dreams that go poof when confronted by harsh reality.

  • Retirement

Everyone agrees that a life where you continue to incur expenses monthly, without a reliable income stream to meet these expenses, is a dreadful life indeed. This is exactly how your retirement could end up looking, if you don’t make provisions for long-term retirement savings via life insurance for instance.

  • Emergencies

Medical emergencies like accidents or even heart attacks,have a knack of catching individuals unawares. To make it worse, they can be very expensive to treat.
Then there are other emergencies like job loss, urgent repairs to house / vehicle, which can also burn a big hole in your pocket.
One way to face such emergencies with a little more pluck is by saving towards an emergency fund.

Saving for child’s education

Let’s see an illustration of how pre-emptive savings towards a goal can make life comfortable for families.

Sameer’s daughter Priyanka wants to become a doctor.

Sameer backs his daughter to the fullest, despite the wide chasm between the cost of medical education and his own savings.

Consider this – education cost of a medical degree today at INR 32 lakhs is beyond most parents and it’s no different for Sameer.

Assuming 5% inflation, ten years from now it will cost Sameer, INR 52 lakhs to fund Priyanka’s medical degree.

Twenty years from now it will be a whopping INR 85 lakhs.

Good news for parents

The good news for Sameer and worried parents like him is that help is at hand in the form of life insurance plans, like ULIPs (unit-linked plans).
ULIPs are ideal to meet the future financial needs of the family. You could invest in them to build a corpus for:

ULIPs, as also other life insurance variants, are ideal saving avenues for the needs of the modern family. Being financial avenues, they are more dynamic and are better at accumulating long-term wealth vis-à-vis traditional avenues like gold and property. Families looking to breed superstars need savings tools like life insurance. ULIPs also provide an efficient tax saving avenue on investment and also on returns, as compared to other financial instruments of investment.

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