Saturday, 19 December 2015

Is it important to have Goals oriented Savings?

Is it important to have Goals oriented Savings?


A friend of mine is earning a lakh a month, and when I asked him, how much is he saving per month, his reply was close to 30k per month. While saving 30% of monthly income is a good savings rate, when I asked him if he has assigned any of the goals to his savings, he went bonkers. Even, as per World Bank Data Gross Domestic Savings for Indians in the year 2014 was 29%. But savings without goals is like doing multiple graduations in various courses without knowing the purpose. Remember those good old movies, where our Hero used to keep money in different kitchen utensils for different purposes – Behan ki shaadi, Naya Ghar, etc. etc.
There are many benefits of assigning goals to your savings be it in any asset class – Gold, Equity, Debt. In fact one can select asset class depending on the goals. If Goal is for short term like 1 year or so, one can look at fixed income instruments like FD’s or Debt Mutual Funds. And if Goal if for longer duration like 20 years, one can take advantage of equity returns over this longer span.
Assigning Goals also reduces the chances of using that money/savings for some other purpose. It is a Human tendency to use money for other things when it is not assigned to any particular goal. Only if I know I am saving this money for my Daughter’s higher education, I will not touch it for a foreign trip.
In a nut shell, when you start savings, don’t forget to sit with your family members and financial planner to assign goals to your savings. It will indeed give better direction to your savings.
Charu Hastir, CFPCM is founder member of www.theriteplan.com. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

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