Savings: an approach to improvise the financial status, from managing day to day expenses by securing the future.
Which includes saving money in banks, FDs, Funds, Equity, Derivatives, Stocks, bonds and shares.
Smarter Savings: Savings done by analyzing the profit and inflation rate. From achieving today’s goal to long- term benefits.
Let’s understand with an example.
Ram makes a savings in bank or FDs by investing total sum of RS. 75, 000. Secured the money for 5 years. Interest return by bank and FDs are 7 % respectively.
After 5 years, Ram will get rs 75, 000 + 6- 7% of the total sum ie. rs 1, 05, 191. But after 5 year the price of common goods hiked by 9%. Which means you get 7% & expense is 9%. So after 5 years you must have savings around rs 1, 15, 397 for better life.
Which mean around 2-3 % of debt.
Now, Smarter Savings means least return of investment must be 10% after 5 years and maximum return based on fund you choose. Here, the rate of profit is higher than the rate of inflation.
So your savings valuation must be equal or greater than 10% after 5 year of period so that you could be balanced financially.
In short, Smarter savings will be more beneficial, happier than savings to manage life properly.
Smarter savings benefits;
No effect of inflation,
No debt at end of year,
No worries about extra monthly expenses,
No tension of retirement,
No pressure of unexpected expenditure,