Best Money Saving Schemes Available In India

With persistently changing financial market scenario and increasing number of banks, financial institutions, online resources that give ample opportunities for savings, many people in India are unable to decide the right place to save their surpluses to meet future financial obligations. Hence, people are seeking advise on the most suitable and workable saving methods from the numerous schemes made available by the banks, so as to manage their personal finances in a better way.

Following are some best places to save money in India. These avenues provide guaranteed returns, better interest rates, financial security, tax savings under various sections of Income Tax Act and other benefits that can help you save money. Let us now discuss on the diverse savings schemes that are available in India.

Savings deposit
Savings accounts in banks are one of the best schemes to save money in India. They provide security to money as well as earn some interest over time. Savings deposits are best avenues for liquid cash, hence, it is advisable to choose savings deposits for maintaining emergency cash. These deposits do not charge any penalty on money withdrawal. There is also a flexibility of accessing the account by two or more people in case it is a joint savings account.

Recently, the Reserve Bank of India allowed banks to determine their interest rates on savings deposits. This decision by the central bank is expected to boost savings deposits growth and spread financial inclusion across the country. Moreover, the Indian government in its 2012-13 budget has allowed for tax exemption on interest up to Rs. 10,000 on savings deposits, which would facilitate maintaining of higher balances in savings deposits.

Recurring deposit (RD)
Recurring deposits allow you to invest some specific amount of money on monthly basis for a fixed rate of return. These deposits have a fixed tenure and at the time of maturity of the deposits, the principal sum and the interest earned during that period is returned to you. It also provides liquidity to access savings at any time, but, penalty is charged for premature withdrawal.

Apart from these regular RD, you can also find variable recurring deposits or variable RD. These deposits offers the option of varying monthly instalment. The minimum amount of monthly deposit varies from bank to bank. In most banks, one can invest the minimum monthly instalment of Rs.100 in RD in India. Interest rates of recurring deposits vary from bank to bank. Mostly, the rate of interest varies between 7%-10% depending on the tenure of the deposit. Tax Deduction at Source (TDS) is not applicable on recurring deposits in India.

In India, one can open recurring deposit with banks and post office. NRIs cannot open RD in post office but can create NRE account with banks and other financial institutions.

Fixed deposit (FD)
Fixed deposit or term deposit is the most common method of investing money. It is suitable for someone who has a lump sum and wants to invest in a single deposit for a specific period of time. Interest rates of these deposits depend on the tenure of the investment. Longer the tenure, greater the interest rate. Premature and partial withdrawals are available, but with a penalty, which vary from bank to bank.

Fixed deposits are offered by public sector/nationalized banks, co-operative banks, Indian private sector banks and foreign banks. Currently, there are 19 public sector banks, 15 private sector banks, 6 foreign banks and 3 cooperative banks offering fixed deposits in India.

The period of investment varies from less than 15 days to more than five years. In most banks, the minimum opening deposit is Rs.1,000 and maximum deposit is above Rs.1 crore. You can choose the period of investment along with the interest payments (monthly, quarterly, annually). The interest rate is guaranteed and does not change for the nominated term.

Moreover in India, many banks offer NRO fixed deposit accounts and NRE fixed deposit accounts where interest on NRE Fixed deposits are tax free but NRO account is taxable in India.

Post office savings
The post office savings scheme is offered by the Department of Posts in India. It is the oldest banking service institution in India. It operates on behalf of Ministry of finance and Government of India. Currently, there are more than 20 crores post office savings accounts and these are being operated in more than 1 lakh post offices across the country.

The Indian postal sector offers many post office savings schemes. The savings schemes include saving account schemes, recurring deposit schemes, time deposit schemes, Monthly Income Schemes (MIS), Public Provident Fund Schemes (PPF), National Savings Certificate (NSC) and many more. With RBI deregulating interest rates on savings deposits, the Government of India also hiked the interest rate on post office savings scheme to 4% from 3.5%.

Systematic investment plan (SIP)
Systematic investment plan is one of the popular method of investing money in India. It allows a common investor to invest in mutual funds by buying units of mutual fund scheme. It is an approach to invest money with the help of professional management. It inculcates a habit of disciplined savings where an investor can invest regularly rather than investing a large sum at a time. The minimum investment in SIP starts from Rs. 500 and there is no maximum limit. In India, tax benefit is available up to Rs. 1 lakh, if SIP is done into Equity Linked Savings Scheme (ELSS).

Thus, all the schemes help your money grow within a period of time. Depending on your goal – short or long term and your need – one time savings or regular savings, you need to select the right savings product that suits you the best.

By: Rahul Satish

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The Value Of Implementing Your Own Personal Budget Plan

Managing your finances should be one of your top priorities. A personal budget is one of the best methods to control the flow of your money and understand why you spend it. It is important to remember that it is a tool and will only work as well as you use it. You can use it to plan for your retirement, get out from under crushing debt and afford luxury items you never thought you could afford.

Don’t get discouraged when developing your plan if it needs a few changes here and there. It does not mean you have failed. It just means you haven’t found the right formula yet. When it is balanced out correctly you should be able to live reasonably comfortable, put money away for savings and pay off your debts simultaneously. The importance of maintaining the habit of saving for the future cannot be stressed enough. Get started as soon as possible.

If you can take at least 1% of your income in the beginning from your paycheck you can start your savings. If you already have a savings plan then stick with it. Even small amounts will add up over time and you can always increase the amount you take as bills get paid off and you have more disposable income. Your financial plan will succeed based upon the habits you create and maintain.

Creating a spreadsheet to track your bills and monthly income is required. You do not need anything fancy to do this. It can be a simple spreadsheet on the computer or a legal pad and ink pen will do nicely. The main point is that you see how much income you have each month and where it goes. Track everything you spend and see where expenditures can be cut.

One strategy that works very well is to put all of the bill money into the bank account that will be making payments. Everything that is left will be kept on hand in the form of cash. The only checks to be written will be those for bills and there will be no debit card purchases. It is easy to see how much cash is on hand and it will discourage any nonessential purchases.

If you are already clipping coupons then you need to start. You probably get more of them than you realize in magazines and newspapers. Ask your friends and family if they use coupons and if not get their used papers. Things that you don’t use should also be clipped out of your budget. Premium movie channels are a luxury you can do without for a while. It can save you a good $20 a month just getting rid of one movie channel. This also goes for any unused gym membership you may have

Tracking the budget from one month to another will reveal how things are changing. It will give you courage to continue and show at what time to increase the amount of savings. When the credit card account is paid in full use the money earmarked for that payment on another card. It will go towards interest and reduced the balance much more effectively.

Realize that a personal budget is just a tool but it does have the ability to change your life. The most important part is the person who makes the plan and sticks with it until they get to their final destination. Taking financial control of your life will be the best decision you have ever made.

By: Allan Ryckman

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How Government Grants For First Time Home Buyers Can Ease The Burden

The realities of the economic situation this country finds itself in means that some of the most necessary investments are out of reach for many people. Where once a home loan was affordable to a young couple, the changes mean that lenders are more cautious than before. Getting a home can become more difficult, but the availability of government grants for first time home buyers has helped to ease the burden.

For many people buying their first home, the pressure is not so much the mortgage repayments that they might face, but in getting the down payment together that is expected by most lenders. This can account for anything from 5% to 10% of the value of the property, which may mean $10,000 or $20,000 on a $200,000 home. Finding alternative funding to help get this money together make a huge difference.

Now, with government grants to help to secure this vital part of the transaction, the most difficult part of the equation is now more or less handled.

How $15,000 Can Help

The importance of the down payment cannot be understated, so the availability of government grants for first time home buyers makes this one challenge all the easier to overcome. Down payments are needed because lenders rarely provide 100% mortgages, and if they do only at very high interest rates.

More common is a mortgage of 90% of the value of the home, meaning that 10% must come out of the pocket of the buyers themselves. This is obviously the real hurdle to clear, with the task of saving such large sums of money very difficult to accomplish in these economic times. So, alternative funding can be considered a must.

With the grant, the task of saving a $20,000 down payment on a $200,000 home is eased to just $5,000 and adding it to the government grant of $15,000. Once this is done, lenders are more open to approving the mortgage application.

How A Grant Eases the Burden

Of course, a grant is very different to a loan in the sense that they are not expected to be repaid at all. So, in getting a $15,000 government grant for first time home buyers, the down payment can be got together with no need to repay the sum.

This means that the common strategy of getting a personal loan for another lender to cover the down payment is not necessary, nor the interest rate applied to it. By accessing the available alternative funding, a home buyer can concentrate their efforts fully on repaying the mortgage.

In the long run, this translates to thousands of dollars of savings over the lifetime of the mortgage. And that is where the burden is eased thanks to this government grant. These savings can be used constructively elsewhere.

Making the Most of the Break

There is no doubt that the availability of these government grants for first time home buyers are something of a God-send to those people who are setting up home for the first time. But it is possible to extend the advantages of the grant even further.

While this kind of alternative funding ensures that $15,000 is secured for the down payment, wise investors will look to maximize the break by saving as large a fund as they can. So, if they manage to save $10,000, they can knock $25,000 off the cost of the mortgage. This is even better news from the point of view of the lender.

Of course, getting approval for the government grant is the first step on the road to securing a first home. It is generally advised to make the application as soon as possible.

By: Joycelyn Crawford

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4 Habits That Help You Gain The Ability To Save Money

Ability to save money is a basic skill that every individual should possess. This skill can be built only when you follow certain important steps, having internal motivation and positive attitude. In order to acquire the ability to save money, you need to inculcate some habits that may be painful but will help you reach your savings goals.

Here are 4 such habits which will help you gain the ability to save money.

Track your spending – create a budget
For many people, creating budget is very boring and painful. But, the fact is, you cannot understand your spending without having a proper budget. It is a tool that helps you know where your money is going.

You need to allot a specific amount of your income for every head. The various heads are food, clothing, transportation, entertainment, health, etc. Assume that you have budgeted Rs. 2000/- for food in a month, then, you need to limit your spending on the food throughout the month to the amount set.

Budgeting helps you plan before your spend. Thus, budgeting is a crucial step to save money as it allows you to control your spending. Otherwise, you may not know how much amount of your money is being wasted.

Spend less than you earn
This is the basic motto of personal finance. As an earning individual, you should understand that, spending less than what you earn will help you reach the ability to save money. No matter, how much you earn, you need to live within your means to lead a sensible life.

Once you start spending more money than what you earn, you start thinking about taking debt and purchasing things on debt. Debt is a kind of addiction, once you get habituated to it, you find it difficult to get out of the debt-trap. So, stay away from credit cards and people (friends/relatives etc.) who provide or accept debt.

Control spending
Controlling spending does not mean that you need to behave like a miser. It only means that you should spend money wisely.

For instance, avoiding eating out daily will not only help you control spending but also will help you stay away from bad health issues. Eating out only on special occasions with your family would let you enjoy the food.

So, limit your desires. Spend money only when you have accumulated enough savings for emergencies and future expenses. You must practice self-control to reach the ability to save money.

Inculcate disciplined savings
Try to inculcate the habit of saving. Set some amount of your income as savings. By preparing a budget, you can understand how much amount of money you can set aside as savings.

You need to save money following a step-by-step process. Start saving small amounts of money on a monthly basis. Open separate bank accounts for -

• Non-monthly expenses like – clothes, shoes, etc.
• Short-term savings for purchasing electronic gadgets (computer, Television etc.), buying a vehicle (bike or car).
• Long-term savings for buying a house, kid’s marriage, etc.

Self-motivation is the key to inculcate the habit of savings. Following these steps sincerely would help you achieve the ability to save money.

By: Rahul Satish

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