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What Are The Two Basic Reasons For Saving?

In today’s dynamic economy, over 60% of urban Indians recognize the need to save. Yet, understanding the true essence of a saving plan remains to be discovered by many. It’s not just about setting aside money. It is the foundation for a solid financial future. With around 40% of middle-class Indians grappling with unforeseen financial challenges, the significance of emergency funds is undeniable. 

In this guide, we will unravel the two primary reasons for saving, diving into their importance and exploring the myriad saving plans available in India. Ready to embark on this journey?

The First Basic Reason for Saving

In an unpredictable world, life can present challenges at any turn. These situations can impose tough financial burdens to bear without preparation, from sudden medical emergencies to unanticipated car repairs or job losses. It’s here that an emergency fund becomes indispensable.

Importance of Liquidity and Financial Safety Net

A robust emergency fund ensures liquidity. It stands as a safety net, guaranteeing that when the storms of financial instability hit, you have an umbrella to shield you from the harshest downpours. This net ensures you can weather any financial setback without derailing your long-term monetary objectives.

The Second Basic Reason for Saving

Beyond the immediate, our eyes must be set on life’s significant milestones and aspirations. Long-term financial goals represent the dreams we work tirelessly to achieve, making disciplined saving vital.

Achieving Long-Term Financial Goals

Beyond immediate needs like emergency funds, planning for long-term aspirations such as buying a home or ensuring a comfortable retirement is vital. Surprisingly, half of the individuals need clear financial goals. However, setting and saving for these goals achieves life milestones and cultivates financial discipline.

Funding Major Expenses and Life Events

Life is marked by significant events like weddings, higher education, property acquisition, or even dream vacations, all carrying hefty price tags. While these milestones enrich our lives, they can also pose financial challenges. 

Sadly, many resort to loans for funding, leading to enduring debts. Yet, with foresight and disciplined saving, embracing these moments without the burdensome shadow of financial liabilities allows us to savor these experiences fully.

Reasons to Save

Reasons to Save

Types of Saving Plans in India

India’s finance world offers varied options. From secure fixed deposits to high-growth mutual funds, there’s something for every financial goal.

  • Fixed Deposits (FDs): A popular choice over the years, FDs are deposits set for a defined duration with banks or other financial entities. Offering a consistent interest rate throughout its term, they remain a go-to option for individuals seeking a risk-free investment.
  • Recurring Deposits (RDs): Functioning much like FDs but allowing contributors to deposit a specified sum monthly, RDs cater to those who save systematically and target short to mid-range financial objectives.
  • Public Provident Fund (PPF): This long-term savings option, enriched with tax advantages, holds the backing of the Indian government, ensuring both security and reasonable returns over its tenure.
  • Mutual Funds: Acting as collective investment mediums, mutual funds gather resources from various investors to allocate in equities, bonds, and other financial instruments. Although they come with their set of risks, the potential yields often surpass those of conventional savings avenues, particularly over longer durations.

Selecting Suitable Saving Plans

Choosing the right saving plan depends on various factors, including an individual’s financial goals, risk tolerance, investment horizon, and tax considerations. For instance, while a young professional might gravitate towards mutual funds for long-term growth, those nearing retirement may opt for the safety of FDs or PPFs. Being well-informed is paramount. 

Fortunately, many online tools and financial advisors stand ready to guide individuals, ensuring their money aligns with and works tirelessly towards their life goals.

Diversifying Savings for Optimal Results

Every individual sets financial goals based on short-term needs, like vacation savings, and long-term aspirations, such as retirement planning. Striking a balance is pivotal. Goals within a 1-3 year horizon typically require more liquidity, making options like liquid mutual funds or short-term FDs suitable. In contrast, objectives extending beyond five years can afford higher risk, making equity mutual funds or government-backed securities more appropriate.

Creating a Comprehensive Financial Portfolio

Diversification in finance means strategically spreading investments across varied asset classes to harness diverse sectors’ growth potential while minimizing risks. Equities, with their growth attributes, are offset by volatility, whereas bonds offer stability with typically modest returns. Integrating these with various saving plans in India, from traditional avenues like FDs and RDs to modern platforms like mutual funds, creates a dynamic portfolio. 

This approach safeguards against market fluctuations and ensures consistent monetary growth, making diversified portfolios a hallmark of astute financial planning.


In navigating the financial landscapes of life, two essential reasons for saving emerge: preparing for unforeseen challenges with an emergency fund and steadily working towards long-term aspirations. We can build a robust financial foundation by harnessing the diverse saving plans available in India. It’s about safeguarding the present and crafting a future with security and opportunity.

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