Did you know that if you had invested Rs. 1,000 every month starting from 2001 till 2021 in Sensex, your current value would be Rs. 13,16,346? If yes, then that is the power of making a small saving.

In a nutshell, Sensex has delivered a 14% CAGR return in the last 20 years.

What does this mean?

This means even a small saving makes a big difference.

How Little Can I Save Every Month?

You can invest with as little as 100 rupees in Mutual Funds every month but it varies from one Mutual Fund to another. Most Mutual Funds accept as little as Rs. 500 every month.

Why Do Small Savings Count?

1) Reep the benefits of the long-term growth in the economy - India is experiencing major economic expansion. In recent times, we have captured a lot of cash flows from the financial institution investors (FIIs). While downturns in the short-term are plausible, Experts including Mark Mobius across the world have predicted a good long-term growth for the nation. However, this is no indicator of the market. Kindly read the disclaimer at the bottom of the article to know more*

2) The power of compounding - The returns earned each year are calculated on the interest & the overall investment from the previous years.

Eg - If Mr. A invests Rs. 1,00,000 & receives an average return of 10% every year. After the first year, the market value of the investment will be Rs. 1,10,000. For the second year, the market value of the investment will be 110/100*1,10,000= 1,21,000

3) Stress-free retirement - Retirement is a long-term goal that is overlooked initially but feared in the long-term. Overlooking retirement as a goal in your 20s can prove to be costly. Firstly, In one's 20s, one can afford to invest & lose money in the name of achieving long-term growth but one cannot afford to take the same risk in their 30s or 40s. Secondly, starting early can also justify small investments.

Eg - Mr. A is 25 years old & plans to retire at 50. He is expecting a monthly income of Rs. 20,000 every month from the year of retirement. His life expectancy is 80 & the inflation rate is considered as 6% p.a.

4) A cushion to fall back on during job loss & job switch - As per Index Mundi, India ranks 86th in the world for the highest unemployment rate. While methods to curb this are being successfully implemented, it cannot be entirely avoided. Situations like this can create a tense environment in the household & can leave you emotionally drained. Savings, whether big or small, shall act as an emergency fund during this time.

Example - Mr. A is 25 years old & wants to retire at 60. He wishes to get a monthly income of Rs. 20,000 per month after retirement. The life expectancy is 80 years & the expected rate of investment will be 12% p.a.

Note - Mr. A has no prior investments. Inflation rate - 6% p.a.

Answer-->

The future value (25 years from now) of Rs. 20,000 per month is Rs. 1,53,721.74 per month.

In other words, you will need Rs. 1,53,721.74 every month at the time of retirement.

The overall corpus to fund the monthly income till the age of 80→ 1,53,721.74*12*20= Rs.= ₹3,68,93,216.60

To achieve this goal, Mr. A has to invest Rs. 5,680 per month for 35 years.

In short, Mr. A will only have to invest 5,680 per month for 35 years to achieve a worry-free retirement life.

Planning your retirement in your 20s has its perks as explained above.

The Combo of Starting Early & Saving Small -

Starting early can not only help all individuals, but particularly those are earning a lower monthly income. Saving small mainly rewards those that start early. So, what is stopping you? Get started with Finhancers today.

When do I start?

Anytime is a good time to start a small saving. For more information, contact us at 080-4124 5021/22 or email us at support@finhancers.com to know more. Alternatively, you can also send us a message via. WhatsApp at +91 8884003034.

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