Bhanu Pratap Singh, a 35-year-old father of two, is a responsible individual who values the financial security of his family. With a stable job and his wife working as a teacher, they have taken the necessary steps to plan for the future. Singh has diligently maintained a budget and invested in their home, Provident Fund, and insurance plans to ensure their family’s well-being.
However, despite their efforts, Singh and his wife may be overlooking a crucial aspect of financial planning. While they are saving a significant portion of their income, they are missing out on the potential benefits of investing.
Saving money is important for immediate and unexpected needs, and Singh understands this concept well. He prefers short-term deposits as they offer easy accessibility to his funds. However, it is essential to recognise that not all future financial requirements will fall under this category. By solely relying on traditional savings avenues, they are limiting their potential returns.
Singh’s savings can be seen as an asset that has the power to generate higher returns. By investing their money wisely, they can expedite their progress towards their financial goals. This, in turn, would reduce the amount they need to set aside from their current income, allowing them to allocate those funds towards other goals or improving their family’s quality of life.
Investing, though it comes with risks such as lower liquidity and fluctuating values, provides the opportunity for higher returns. Singh can mitigate these risks by aligning his investment choices with the time horizon of his goals. Funds needed for emergencies should be readily available in bank accounts and deposits, while long-term goals can be supported by investments that offer better returns over time.
Furthermore, it is important for Singh to regularly review and adjust his investment portfolio to ensure it remains suitable for his current goals and preferences.
(With inputs from Centre for Investment Education and Learning content which appeared in Economic Times)
