Next economic activity is Savings, which means putting aside funds for use at a later date. The form of savings used determines the return on the investment. Keeping cash at home for one full year would mean depreciation in its value by equivalent inflation rate. Putting funds in Savings deposit of a Bank would give a return of 3.5% to 7%, depending upon the Bank/Entity where funds are parked. Making a Fixed Deposit or investing in Government Small Savings Schemes would give you a return from 6.5% to 8.3%. All the aforementioned investment returns are taxable except PPF, Tax Free Bonds and Sukanya Samruddhi Yojna, to name a few. There are other asset classes where funds could be invested depending upon risk appetite of the investor. Savings and Investments are two sides of a coin where investment means deploying funds judiciously.
Later usage of Savings/Investments could be Contingencies, Routine Expenses, Future Purchases, Financial Goals and Retirement Planning. Benefits arising out of Savings/Investment could be earning passive income, produce a robust economy, provide financial security, growth opportunities for business ventures, Responsible investing forms the habit of regular saving and finding avenues yielding higher returns. Equity MF schemes and Debt MF schemes provide market-linked returns on the investments.
Borrowing means procuring funds, goods and/or services today in exchange with a promise to pay at a future date. Maxim applied is "Buy now and Pay later". Some of the examples of borrowing could be usage of credit cards, purchases on EMIs, Pay day loans, Cash Advances and availing retail loans.
Reasons for borrowing could be major purchases, meet contingencies, convenience, planning for future goals and taking advantage of attractive discount Sales/Offers. Responsible borrowing means timely repayment of loans as and when due.
Keep watching this space for interesting updates on Investments!
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