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Importance of Savings & Investments

November 05, 2018 3092

We do not live in a world where we take each day as it comes. Financial emergency may arise at any time. It is needless to say that having a savings/investment portfolio is important. Money is something that is exchanged also something that is saved. Money matters and is important for survival.

Here are a few reasons why it's important to have savings and investments:

Transaction Motive-People save cash to bridge the interval between receiving the income and expenditure. The amount depends on the interval at which money is received. Businessmen and entrepreneurs have to keep some part of the income to meet the current needs. Amount held in liquid will depend on the business turnover. Transaction demand for money stays constant at all levels.

Precautionary motive- This means taking precautions. People hold cash to deal with contingencies like unemployment, health issues etc. They want to keep a part of contingency liability aside to us it in case of an emergency.

Speculative motive- People also hold cash to use it in the financial market. They want to take advantage of the movement in the financial market regarding future changes in price and rate of interest. The ROI and people's tendency to spend money are inversely proportional.

Children's education- The most important thing for a person is to educate his children and send them to the best school and college. It's important to have savings for that so that you can provide your children with the best education.

Self reliance- When you save, you get a feeling of self reliance and power to do things. It gives you a feeling of independence.

For Family's security- If something happens to you, your family should be well taken care of. Having a savings and an investment portfolio ensures that.

Savings and investments are mutually connected. It is important to have a savings nest so that you are more in control of your future and life. Invest in HDFC Life's various savings plans to secure your future.

How much should one save and invest?

  • Savings and investments are mutually connected. Savings are money put aside in cash or in a bank's savings account; it is ready money whenever you wish to use it for emergencies or a short term goal. Savings will usually fetch you minimal gain.
  • Investments are funds put into plans that fetch you better gains, at the end of a certain period.
  • One should save around 10 per cent of one's income every month and put aside 10 to 15 per cent of income into investments. While savings are for the short-term, investments should be on long-term basis as they help you grow your wealth to meet some life goals.

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ARN: EC/06/2017/9792

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