Cultivating the habit of early savings and for a very long term
There are days of hyper-inflation. Whatever one earns, is spent on essentials. The word "luxury" is becoming meaningless today. For example, the air-conditioners were thought of as luxuries some years ago. This is no more so, as literally every flat, every apartment, every single individual house, has at least one air-conditioner to beat the heat.
Education of children has become a huge expenditure. There are private schools in big cities, where a single admission into the lower kindergarten (LKG) class carries a premium of a lakh of rupees. Worse, there are many parents ready to shell out this money to just ensure that their child gets admission into these elite schools.
The cost of every food item has gone through the roof with vegetables, fruits, meat and milk topping the list.
Each of the aforesaid increases in food expenditure and the generally high cost of living should worry every single Indian, even those who earn around a lakh of rupees every month.
However, as yet, this does not seem to be happening. Consider, for example, the money that is rather wastefully spent on eating a whole lot of junk food --- the pizzas, noodles, chaat items and the like -- every weekend. There are parents who happily buy whatever their children ask for, or demand.
It ought to be remembered that to just maintain the present standard of living, the young generation would need tremendous amount of money in the years ahead. Apart from the huge amount that gets spent on serving the Equated Monthly Installment (EMI), towards the costly housing loan, regular savings, combined with a will to cut down on avoidable consumption, can work in favor of these young people.
Investment in a pure term plan, either with the LIC or any good private player, is just about the exact thing needed to take care of the basic insurance need, if one is gone forever from this earth. However, long-term safe investments like the recurring deposits can be very useful.
For example, an investment of just over Rs. 500/- per month, in a good private sector bank, at 9.25%, will give the person a good amount of rupees one lakh after ten years. It ought to be remembered that the same salary may or may not be available for any length of time. Even in the best of companies --- including the IT companies --- there is retrenchment in the form of "restructuring" This may amount to reduced salaries as well.
To take care of future shocks, as well as manage the inevitable rise in the cost of living, it needs to be remembered that regular savings is a must. Similarly, investment in the outskirts of cities, including the metros, in real estate is a very good option. There is no way that the heart of the cities will expand to a great extent.
For example, one often sees that the old buildings are demolished and the new ones come up. Often, there are apartments that rise up to even ten floors. But the space is very limited, and whatever is available, is very costly. So, one has to compulsorily move towards the suburbs or surrounding areas for investment in real estate. There is every chance that these areas will grow at a very fast pace in the years to come.
Investment in gold is not the right solution at all. Gold seems to have reached its peak now. With the economy set to see better days, a whole lot of money will go into real estate, and money in the hands of individuals to buy gold, will be rather limited, leading to less demand and consequent downward trend in prices.
So, investment over the really long term is required. There is a need to insure the lives of wives and children too. Once again, a good term plan is all that is needed, for each member of the family. It should be remembered that investment in life insurance is not savings. It is only for protection. There cannot be any justification to invest huge amounts in life insurance, particularly in policies like endowment, where the returns are very low.
Investment in equities can be made with expert advise. There are many professionals, for example, who advise investment in Blue chip companies. This advise is well taken, as these companies regularly spin profits year on year, with the help of their superb professional management.
The time to act is now. It has to be now or never. Regular savings in various forms is seriously called for, more so, since the cost of living is never ever going to come down at all.
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