Types of Savings

We can divide your total Savings into three parts:

1) Sacred Money - You would never want to risk this part of your savings. You may keep this at home under the mattress or invest in Bank accounts and in Government guaranteed schemes

2) Serious Money - This part of your savings you are willing to expose to a little bit of risk. You may buy debentures issued by high quality companies, or you could invest in FD's of good corporate.

3) Aggressive Money - This you may use to invest in shares or other relatively risky investments which have a potential of giving excellent returns.

Types of Savings can also be considered based on the foll. Factors: Your savings time horizon (i.e., less than a year; more than five years); and your savings need (i.e., Fun Fund, Retirement).

The amount you want to invest and the
time period for which you are investing depends on your short-term goals or long-term goals. Moreover, there are several high risk investment options which can be the best way to invest money short term, but then that would depend on how much risk you are willing to take.

Long-term Savings:

If you’re willing to tie up your money for longer term i.e., immediate liquidity is not required in the short term and take some risk to get a better return  (long term gain) especially over longer term, then go for Long-term Saving options.

Usually when you say long term, it is the one that does exceed more than 12 months. But now a days, 5-7 Years time span is considered as long term;

A well planned Long-term Savings should allow the following benefits:

1) To assist the family obtain a greater degree of security,

2) Make inheritance available for the family as well as fund retirement,

3) Large Purchases like Buying Home,

4) Children Higher Studies Education

Short-term Savings for regular/ irregular expenses:

When you think you will need to meet your day-to-day expenses, tide over more or less predictable irregular expenses and short term goals such as Buying vehicles, Festival, Buying Household things, Vacation, … then you go for short term savings to ensure that you have enough liquidity & decent returns in the short term.

Usually when you say short term, it is the one that does not exceed 12 months. But now a days, 3-5 Years is considered as short term; For example, for the fund based investments, such as annuity, insurance and mutual fund, a fund which has a 5-7 years time period, is said to be a short term investment. 

So in this fast paced market, the period ranging from a few months (upto 12 months) to a couple of years (3-5 years) is considered as short term; but it all depends on when you need your money back & how long you want to keep your money in the market.

The best way to invest money safely for short term would be for keeping it in “Savings Account”, which will have more liquidity i.e., can withdraw money when you need it, and can also earn interest on it.

Retirement Savings:

To override the foll. Statement "Retire from Wok. But Not from Life", you have to plan your finances to sustain yourself for the post retirement.

A well planned retirement savings should allow the following benefits to live without any money worries after the retirement. :

1) to plan for sustenance,

2) for any medical treatments,

3) to enjoy life peacefully,

4) for physical support and care,

5) not to rely on your children for your financial needs

6) It gives one a feeling of independence which is invaluable to anyone at any age.

The most common way to save for retirement is through a payroll-deducted Provident Fund contribution and Pension contribution.

Fun money:

Fun Money is a savings fund to spend on anything the family wants. To relax and to have peace of mind, All Family members should start contribute/save to have fun/entertainment fund over a year & spend it at the end of the year on something that the family likes/wants as a whole.

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