Saving Tips: Two years ago, the savings rate as a percentage of GDP was 11.5 percent; it is currently at 5.1 percent (2022–2023) and does not appear to be increasing anytime soon. Even though most of us would find these statistics at the national level boring, they have a direct impact on us.
Inflation’s Stealthy Impact
Have you noticed that the costs of the things we frequently buy are rising rather quickly these days? So that’s how the skyrocketing rate of inflation affects us virtually daily. Because of this, we now withdraw money from our pockets more quickly than we did in the past for both necessary and discretionary purchases, or even just to satisfy our desire to go out and have a little fun. As a result, we spend more money now and save less.
Why are household savings declining?
Our savings have drastically declined for two main reasons. As was already mentioned, “inflation” is one major issue. When did your favourite snack cost half as much as it does now, you might recall? That’s inflation at work, which makes saving more difficult for you. There are numerous explanations for why it is occurring, but that is a different discussion altogether.
The issue of “rising debt” is another. Not just you, but a large number of people also take out loans to cover the costs of necessities like healthcare and education, the prices of which are increasing at a rate that is higher than average inflation. Things have gotten to the point where occasionally people are taking out loans for regular, everyday costs like groceries. Because of this, the Buy Now, Pay Later (BNPL) trend is peaking, which is undoubtedly bad news for our savings.
What is the story behind this decline in savings?
First of all, when people save less, they contribute less money to the government treasury, which is analogous to the nation’s financial engine running low on fuel. Therefore, more funding is required to support the establishment of new companies and to construct infrastructure like roads and bridges. That puts a stop to the economic expansion of our nation. Not having savings also makes life’s unexpected turns more painful. Imagine finding yourself without a job or receiving an unexpected medical bill just when you need the money the most. During these uncertain times, savings serve as a safety net, and we can only imagine what would happen if that safety net disappeared.
And what do you know? You run the risk of borrowing money and becoming indebted to other people if you don’t save. This borrowing of funds can turn into an endless, even vicious cycle that makes it more difficult to save money down the road. How then can we get back on track with our savings?
Simple life hacks
First, let’s examine some simple tips that anyone can use to increase their savings:
- Prepare food at home: Dining out can be very costly. Making meals at home is like receiving a significant food bill reduction
- Share Rides: Carpooling can save you money on transportation if you consider it to be a small-scale adventure with your friends.
- Purchase wisely: Browse around before making a purchase. You can look for discounts in real life, just like you would when trying to find the best deal on a video game.
- No more impulsive purchases: Refrain from indulging in those alluring treats—in-store or virtual. You don’t buy something if you don’t need it! Due to the holiday season, exercise greater caution in this regard.
- Abandon unwelcome subscriptions: Do you recall that infrequently used music streaming service? Put it on hold! You’ll make a little extra money. If you look around, there are more of these things hiding in the shadows.
- Arrange your finances: Consider your spending plan as a treasure map. Keeping tabs on your earnings and outgoings allows you to identify areas for reduction and increase your savings.
- Automate savings: Imagine a tiny robot that automatically transfers money each month from your spending account to your savings account—all without your knowledge or consent.
- Set Goals: Your ideal getaway, a cosy retirement, your own house, or a beautiful device. Just like a target in a game, setting goals provides you with something to strive for. This may inspire you to gradually increase your savings.
Two things to watch out for
- Pay attention to inflation: Keep in mind that because you typically purchase more goods and services than the official inflation calculator allows, the inflation rates provided by the government do not accurately reflect the rate of inflation you will experience in real life. Therefore, do not relax if you do not observe a noticeable drop in prices.
- Ditch Debt: Be cautious if you’re already drowning in debt. Reducing your debt can help you in a number of ways: you can pay off small amounts of debt whenever you can, retire larger loans as soon as your finances stabilise, or you can combine the two. Naturally, wait to make a purchase until you are at ease.
Disclaimer: This information is provided solely for informational purposes. It is important to note that investing in the market or a business idea involves market risks. Before investing money as an investor/ owner/ partner, always consult an expert. DNP News Network Private Limited never advises to invest money on stocks or any specific business idea. We will not be liable for any financial losses
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