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Saving Schemes

The term saving is quite popular in India across all the sections in the society. Most of the people in the country give importance to the aspect of saving their earnings in their young age to realize their dreams and aspirations in future be it for a short or medium or for the long term period.

The word ‘Saving’ refers to the income which is not spent or deferred consumption. Any individual irrespective of their job can save their money by putting it aside through an array of methods be it depositing the saved amount in a saving account or by adding it in pension account or by investing it in any of the schemes or funds run by banks, financial institutions, post offices, private entities and the list goes on. Saving to an extent also involves reducing expenditure such as recurring charges.

About Saving Schemes in India

In terms of personal finance, the word saving specifies low – risk preservation of cash as in a deposit account as against the riskier investment.

In the case of economics, it broadly refers to any kind of income which is not used for immediate consumption.

The word ‘Saving’ differs from ‘Savings’, as the former refers to the act of not consuming one’s asset and the latter refers to either multiple opportunities applied to reduce expenditure or an individual’s asset in the form of cash. Saving refers to an activity occurring over a while, a flow variable. Whereas, the term savings refer to something which exists at any one time be it a stock variable. The difference between saving and savings are often misunderstood, with the common man and even investment professionals often refer to saving as savings.

The concept of saving schemes was introduced in India with a motive to cater to the wide demographic environment and to encourage the habit of investing for achieving long term financial goals be it for retirement, the marriage of a girl child, higher education of children, purchase or building of a house or buying a car and so on. Investment in saving schemes are ideal for building long term wealth creation as they come up with a certain lock-in period and promise good returns in future. Most of the schemes are well suited for risk-averse investors as the degree of risk involved is very less to meagre, thus making it popular amongst the middle-class group in India to go for it without second thoughts.
As investments made in saving schemes are not impacted by market volatility, they are one of the safest forms of investment options. In addition to this, the interest rates on most of the saving schemes are revised quarterly or half-yearly or on an annual basis or at a frequent interval of time by the government of India, banks, financial institutions, public lenders keeping in mind various aspects including the rising cost of living and inflation rates.

What is a Saving Scheme?

A Saving Scheme is a tool or instrument which helps an individual to achieve his or her financial goals over a particular period. These schemes are introduced to the general public by the government of India, banks – both public and private sectors and financial institutions. The interest rates for these schemes will be decided by the government of India or by banks which rolls out the schemes and are subject to periodical changes.

The saving schemes comes in handy to meet emergencies, for retirement, to pay off loans, children’s higher education, marriage, purchase or construction of a house, at the time of job loss and so on.

Importance of Investing in Saving Schemes

Saving Schemes act as a bridge between the citizens of the country and its economy as the money saved by the individuals will be used for economic activities. It acts as a way to increase the inflow of the money into the Indian economy. During earlier times people in India used to save money with themselves at home and this resulted in poor circulation of money in the economy, leading to stagnation of wealth. The poor remained poor and the wealthier continued to become richer.

The motive of introducing saving scheme was to allow the wealth of the Indian citizens to appreciate or grow at higher interest rates so the benefits of the same could be reaped through tax exemptions which come up along with some of the saving schemes rolled out by governments, banks, financial institutions.

Check out the List of Reasons for Investing in Saving Schemes:

  • Long – Term Benefits – Most of the schemes are for a long tenure and compound interest concept of interest rate calculation is used in them. On investing for long term one can fetch a big-returns in hand. The minimum lock-in period for these schemes are set at 5 years and the maximum can go up till the investor turns 60 years. The compounding of returns added with long – term saving will fetch you interest on interest thus earning you a huge lump sum amount on maturity.
  • Safety – Saving Schemes is the safest place to put in your hard-earned money as this will help you to secure your future needs and you need not have to face any hassles in holding on to the liquid money.
  • Tax Savings – Most of the Saving Schemes comes up with tax benefit offers sometimes it is tax deductions, exemptions and sometimes it is both. Some of the schemes offer investors tax deductions on investment up to Rs 1,50,000 per annum under Section 80C of the Income Tax Act of 1961. While some of them offer an exemption on investment, interest accrued and the maturity amount.
  • Retirement Funds – Periodical depositing of money in long – term saving schemes will help individuals to build sufficient retirement corpus which can be used post – retirements when regular earnings take a back seat. If an individual start saving from a young age, then it will reward you with huge corpus which can be used after retirement and one can lead a comfortable life without any doubt.
  • Shun Unwanted Expenses – By investing in Saving Schemes, one can shun unwanted expenses which you may end up spending on. On the other hand, investing in a surplus amount in saving schemes which remains after meeting all the necessary expenses will fetch you a decent return and thus averting expenses on unnecessary goods and services.
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