World Thrift Day 2020: Let Us Change Our Behaviour Towards the Savings and Financial Security

World Thrift Day is celebrated every year on 30th October worldwide to promote the savings and financial security of individuals and nations as a whole. This day was established to inform people all around the world about the idea of saving their money in a bank rather than keeping it under their mattress or at home.

In India, due to the death of late Prime Minister Indira Gandhi on the same day in 1984, this day is being celebrated on 30th October.

The first International Thrift Congress which was held in Milan, Italy in 1924 had declared October 31 as the World Thrift day. The aim of celebrating this day is to change our behaviour towards saving and constantly reminds us of the importance of wealth.

Wealth in terms of saving will act as a safeguard to face financial crisis. It helps us in starting a business, getting a good education, and availing good healthcare treatment. The habit of saving will give independence to both people as well as the country.

Thrift is one of the ancient Indian virtues. Right from our childhood days, our parents teach us the importance of wealth and the need for saving. A well-known saying is "Cut your coat according to your height".

In today's world, wealth is essential to safeguard your health. How health makes wealth?

• A healthy lifestyle can promote wealth.
• Improvements in health can reduce health expenditure.
• Increased savings can avoid debts and relieve stress.
• It prepares for health emergencies.
• Saving gives mental security as well as social security.
• Saving can lead to a positive attitude to achieve a longer life.

A healthy lifestyle reduces the risk of many life-threatening diseases like heart attack, stroke, cancer and others.

When you first start earning money, you might not have thought much about saving (and even if you did, there wouldn’t be much left from your meager salary), but when you start getting hikes and when you see your friends investing big, you might have tried to start saving some money of your own. This is not an easy task for many of us due to various reasons.

Here are some steps that you should take immediately to develop a healthy habit of saving:

Make a Realistic Saving Goal

Do not jump into the deep end and make an unachievable goal, especially if you have not been trying and failing at saving for years. If you make a goal that you cannot achieve, you will unnecessarily put yourself out there to be demotivated. Start small. For best results make a goal for six months or a year. Decide upon an amount that is realistic in this period so the fact that you can achieve it if you try will keep you motivated.

Break the Goal into Smaller Targets

Once you have thought about what a realistic amount and period is for you, the next step is to break this goal into smaller targets. For instance, if your goal is to save Rs. 12,000 in six months, break this into a smaller period of time and amounts. Thus, instead of thinking of saving Rs 2,000 per month for six months, think about saving Rs. 500 per week. Smaller targets are more easily achievable and thus will keep you motivated. This is to create a habit of saving. Once you become accustomed to the habit, you can aim higher and increase the goal.

Reward Yourself

Treat yourself when you achieve a target, be it a daily/weekly/monthly target. Reward-punishment psychology will ensure that your behaviour of saving is reinforced with the reward. Soon you will be on the way to being intrinsically motivated to save.

Open a separate bank account with no ATM, Debit card or Online Banking facility

This may sound a little farfetched, but think about it, what better way to make sure that you are saving money unceasingly? The new bank account will give you a clear picture of how much you are saving. There will be no confusion as to how much you saved each month, and if you are able to keep up with your targets.

Further, the lack of an ATM card, debit card, and online banking facility will make it that much more difficult for you to spend from that account. So, chances are that you will leave it untouched unless you need the money for an important cause.

Keep a Daily Motivator

You have to keep yourself motivated when it comes to saving. You can do this by placing a motivating statement or two in places that you will see every day, many times a day, such as a mirror or in your wallet. This will give you the daily motivation that you need.

Benefits of Saving

Start a journal. Spend a few minutes daily jotting down all the benefits that you will receive once you have achieved your goal. Make sure that you also write down how it makes you feel to be able to save and reach your daily/weekly targets. Writing down the benefits will motivate your subconscious mind and in return help you stick to the routine of saving.

Ask a friend/ family member to help you stay on track

Having someone to keep you motivated when you are not feeling very motivated is a sure way to make you stick to the routine. Pick someone that you are close to, authoritative (if need be), and are sure to help in keeping you motivated. Don’t pick someone who is not close to you because they may not be as comfortable telling you the truth or pushing you when you need it the most.

Sticking to these steps will ensure that you are well on your way to saving that money as you have always wanted to. It may be difficult in the beginning, but you will soon get used to saving and it will become a habit and a way of living.

From some smart banking and budgeting tips, you have several ways here to spend less and save more. A few of them are listed here:

Choose a bank that gives back and Gives Back Plenty

India has no dearth of banks and finance firms, public or private sector ones. Look for one that makes the most sense for you. How are you planning to save? Are you going to open a savings account, going for term insurance plans or mutual fund investment, or start a fixed deposit? Almost all banks offer these. But the rates could vary for each product slightly or drastically. For instance, if one bank gives more returns and offers on a savings account, the other might offer a better rate for home loans. Also, look for benefits such as nominal or zero ATM or overdraft charges. Don’t hesitate to contact the bank and ask specifically about all these.

Ideal Distribution of Your Salary

Ask the human resources department at the organization you work at to divide each salary amount between your checking and savings accounts. If you keep a definite percentage to routinely deposit into your savings so you are not likely to touch that while out shopping or pubbing. Another perk here is that interest rates are normally more for savings accounts than they are for others.

Set targets with a Budget-Tracking App

Set a goal for your monthly income. The first thing to do would be clearing away all the dues and bills. The credit card bill is usually the most anxiety-inducing one. Once that is done, coming up with a doable and realistic plan for the monthly expenses and savings will be a tad hassle-free. Of course, sticking to the plan is totally on you. There are plenty of spend-tracking apps like Mint and Budget to assist you with this.

Check on Your Account from Time to Time

Sometimes certain receipts and not-all-there-looking charges can give you the shock of your life and hence it is important to keep checking your account every now and then. We may be living in an age of electronic banking, but that doesn’t mean the system is error-free or flawless. Keep all your account sips and bills at least for a week. This way you can keep track as well as cut back on unnecessary spending (like more dine outs than healthy).

Sparing use of ATM Transactions

ATM transactions being easy doesn’t mean that you should go there to withdraw every time you need cash. The ideal thing to do is to take out a set amount every week and limit your spending within that. This way, you won't be compelled to hit up ATMs of other banks and get smashed by ATM charges. To be systematized, you can divide money into envelopes and mark bills, food and groceries, leisure, etc. Paying with cash rather than plastic at stores will keep you more grounded.

Plan Cash Withdrawals

If you end up using ATMs more often, plan each visit sensibly to evade usage fees. The first few times, you are allowed free transactions, after which it will be charged INR 20 per transaction and INR 10 per inquiry. Stick to your own bank’s ATM as much as you can. When it is time to take out cash, see if you can swipe your card.

Settle Outstanding Credit Card Dues

Credit Cards are a nightmare dressed in a daydream!

Disbursing your credit card bills and even keeping one (for emergency) rather than a host of them is one way to save lots. Most credit cards have yearly fees and higher interest rates. So, unless you are using one regularly, it is just a money-sucking piece of plastic.

Having a contingency fund is important. This will come in handy should you encounter situations that will require you to shell out money immediately.

Has anyone of you heard of the term ‘impulsive buyer’? This is a phrase you do not want to be associated with. More often than not, impulsive buyers regret their decisions afterward. Avoid being tempted to make purchases that are not aligned with your budget. Make sure you have a clear purpose whenever you visit the mall or stores.

Please note that - Saving and Investing only sounds similar but are different; depending on the goals and outcomes.

It is highly advisable that you consult with a credible financial planner before making investment decisions. They will help you evaluate not only your financial goals, but also your risk tolerance for investments.

Saving in Fixed Deposits Not Enough

Indians are traditionally seen as ardent savers. Though the overall savings rate in Indian households has decreased in the last 5-6 years, as much as 55 percent of working Indians are habitual savers for their long-term goal of retirement, as per the Aegon Retirement Readiness Index (ARRI) 2018.

In another survey on women investors conducted by Scripbox, an online investment platform, about 80 percent of the total respondents’ report to be disciplined with their savings. But, nearly 58 percent among the 80 percent women respondents admitted shying away from investing and park their money in fixed deposits, recurring deposit, public provident fund or bank account.

Experts say that in spite of disciplined saving, investors may not achieve their future financial goals by sticking to the safety of deposits and savings accounts. “Saving and investing are two sides of the same coin and often used interchangeably. However, there is a big difference in what each delivers. Savings is money set aside for emergencies, which offer minimal or no rate of return. Investments, on the other hand, are a systematic approach to wealth creation,” says Ashok Kumar E.R., CEO, and co-founder, Scripbox.

Value Erode Over the Long Term

Inflation poses the biggest threat to your money in the long term. “Post-tax returns on traditional investments such as fixed deposits are less than the inflation rate. If your savings earn less than the inflation, the value of your savings will steadily decline over time,” says Sousthav Chakrabarty, CEO, and Co-founder, Capital Quotient, a SEBI-certified financial advisory firm.

A fixed deposit or savings account can help fulfill goals that are only one-two years away but prove to be insufficient for long-term goals such as retirement or buying a house.

Apart from inflation, tax, unplanned outflows, and unexpected emergencies are some of the other factors that can destroy savings if not adequately invested. “A disproportionate increase in lifestyle relative to earnings can also diminish savings over time,” points out Sunder.

Low Returns Mean Higher Saving

One of the downsides of investing in low-yield instruments is that you have to stash away bigger amounts to accumulate the desired corpus for various goals. “Money saved but not invested would mean lower returns. This, in turn, means that the investor needs to target a higher savings rate,” says Rohit Shah, founder, and CEO, Getting you Rich.

This practice can affect one’s purchasing power as there will be lesser disposable income for spending. “Though saving is a good habit, excessive saving by smothering one’s aspirations can get frustrating” adds Shah. Also, if you increase savings towards a particular goal to make up for a shortfall, you may compromise on other goals.

Moreover, financial planners say that they have seen a decline in savings rate over the years due to increased spending. “Previous generations spent 30 percent of what they earned and saved the remaining 70 percent. Today, it is the other way around as financial goals have changed and aspirations have increased rapidly. Leaving money as cash, in the bank account, or even in a fixed deposit is not going to cut it today,” says Kumar.

Don’t Just Save, Compound Money

Pressing on the importance of long-term investing, Shah says, “One has to methodically compound their money over time by investing and re-investing to ensure that they don’t outlive their savings.” Chakrabarty concurs. “Wealth can rapidly snowball through compounding. But, one will have to invest for the long term to harness the power of compounding,” he says.

Compounding is basically earning interest on the returns or interest already earned till then.

These days, mutual funds let investors start investing with as little as INR 500 per month. You can automate your savings by starting a systematic investment plan (SIP) in a mutual fund. “It is wise to make a budget, spend what is left after covering the basic expenses and savings. That way, you will save (and invest) regularly and spend without worrying. Starting a SIP is a good way to do this,” says Kumar.

The only way to grow your money is to invest it in a mix of financial products as per your risk appetite and investment horizon. However, don’t blindly chase returns. Stick to asset allocation to effectively balance risk and reward in your investment portfolio.

The key to making new habits work out for you is consistency. You need to avoid temptations. Commit to managing your funds prudently with these effective saving tips. For some people, financial struggles are due to not bringing in enough money. For many others, though, the problem comes from not spending money wisely or from spending more money than they make. In either of those problems, a common goal to reach is: ‘Save Money’ thereby Spend or Invest wisely!