Financial wisdom says that one needs to save for a rainy day. We know that story about the ant and the grasshopper. The ant worked hard and saved for winter. On the other hand, the grasshopper was busy having fun. When winter came, the ant had enough food to eat, and the grasshopper was left with nothing.

Similarly, one needs to save money for future needs. For instance, you could need money for a vacation or to buy a car or a house. Major life goals such as retirement, children’s education, and marriage also require money.

When you start earning, many of these goals seem to be in the distant future. Still, starting to save early is a healthy habit. Money grows due to the power of compounding. It grows better over a long stretch.

Let’s look at 5 ways to get started on your savings journey.

1. Create an emergency fund:

Firstly, one should make an emergency fund. This is more necessary than starting to save from a futuristic point. The emergency fund should be equal to your three-month-long expenses. This should include EMIs and insurance premiums. One way is to keep the money in a savings account. One may also park the money in liquid funds. Liquid funds give higher returns than a savings bank account. The money can also be withdrawn on short notice. An emergency fund should be used only in emergency situations. One should not use it to meet other purposes.

2. Open a PPF account:

The first thing you should do is open a public provident fund (PPF) account. PPF offers guaranteed returns at a given rate of interest. It provides attractive interest rate. The lock-in period is 15 years. So, investing in PPF is for the long term. One can extend it for a period of 5 years after the initial 15 years. PPF investments are eligible for deduction under section 80 C of the Income Tax Act. Any investment in PPF can be deducted from your income to arrive at the taxable income. Investment in PPF can form the debt part of your portfolio.

savings journey

3. Invest in ELSS:

Equity Linked Savings Scheme (ELSS) is also a nice investment option. ELSS mutual funds invest in equity schemes. It comes with a lock-in period of three years. Investments in ELSS are also eligible for deduction u/s 80C of the Income Tax Act. ELSS has the potential to provide high returns over a long period of time. ELSS thus becomes a natural choice when it comes to tax-saving investments. ELSS funds can form a part of your equity investments.

4. Start mutual funds SIPs:

You can also invest in non-tax saving mutual funds. Ideally, the investments should be through the SIP route. This allows you to invest small sums of money on a regular basis. You can choose from equity funds, debt funds, and hybrid funds. This will depend on your asset allocation.

5. Invest in fixed deposits:

If you have a low-risk appetite, you can choose fixed deposits. They provide moderate but guaranteed returns. Fixed deposits for a tenure of five years are eligible for tax deductions u/s 80C. Remember that the maximum deduction available under u/s 80C investments is Rs. 1.5 lakh.

A very long journey begins with a simple, timely step. Getting started early on your savings journey is thus important.

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