Why should you save money - Types of savings everyone should necessarily have | Elamaran Selvam

Most of us often spend almost all the money we earn. Later, we worry that we should have saved at least a small amount to manage further situations. Rather than worrying, one should better know how to spend the money they earned. Here you will learn about the types of savings which everyone should follow necessarily for a better future.

Why should you save money?

First and foremost, saving your money helps you to get rid of any emergency situation, which you can never predict when it happens. As part of this, our living example is the COVID-19 period that no one has ever expected to be. In these times, most of us had salary cuts, and some of them lost their jobs too; To tolerate all, a better saving would have helped you to overcome this situation. As part of saving your money, there are 3 basic types of savings that everyone should have.

Emergency Savings 

As said, most important matters should be dealt with before other things. An emergency situation is not just a job loss, it could even be worse with a long-term illness, destruction because of a natural calamity, or some unforeseen Car/Bike and Housing repairs. We never knew when these expenses occur, so instead of worrying about the future, let's get prepared to face what is about to come. 

How much should you save?  An emergency fund should cover at least three to six months of your living expenses; keep in mind this includes your house rent, loans (if any), and even mobile bills too. When you lose your job, these savings should stand as a back up to pay all your necessities until you find a new one. 

Personal Savings

Once you are ready with your emergency funds, now it's time to look up for your personal savings. We all have so many wishes that we could buy a new mobile, own our dream car, or even go on a vacation to your favorite place. All these could happen only when you give room for them to accommodate by start saving some money as part of your Personal savings. 

Think about these personal savings as your cozy bed, where you rest after all your struggle. Saving money under Personal savings majorly helps you to free from the debt of interests that you pay as part of your expense. There is nothing wrong with buying your dream car - but the problem is you should not end up paying interest as part of your purchase, instead, save money for the long term and happily buy your car end of the saving period.

How much should you save?  It depends on the personal goal you wish to achieve within a specific period and make sure to not cross more than 30% on your income. Now, make this as a commitment to save towards your personal savings. When you move for a high paying job, do not forget to adjust your savings while sticking to your plan.

Retirement Savings 

Retirement is a part where most of us miss planning for a perfect ending. When we join our jobs in the initial period as a fresher, we never think about retirement plans. One should consider a viable amount as part of their monthly expense contributing towards their retirement for a happy ending. The earlier we start, the lesser amount we spend towards our retirement contribution, and the situation get a bit difficult later we think about it where the amount doubles for a minimal retirement amount to bag. 

Look at the basic estimate below to generate 1 Crore as a retirement amount to withdraw at the age of 60.

• At the age of 25, investing ₹1555 each month returns 1 Crore.
• ₹5322,  if you start at 35
• ₹10109, if you start at 40
• ₹20017, if you start at 45
• ₹43471, if you start at 50

You can do your calculation based on the amount you wish to spend and the remaining age left for retirement. Start planning your retirement as soon as possible to take advantage of the power of compounding. Also, remember the tax accumulation over the years as you grow older, and review it periodically to stay on track.

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