How to Automate Savings: SIPs, RD, and Other Tools

Saving can be a real challenge, especially when the unexpected expenses just seem to keep on coming. But what if there was a way to make saving easier and more consistent? Automate your savings. By automatically setting aside a portion of your income, you can steadily build your wealth over time without having to think about it. Whether you're saving for emergencies, a vacation, or retirement, automation makes it simpler and more disciplined.

One of the most popular ways to automate your savings is through a Systematic Investment Plan. You invest a fixed amount every month in mutual funds in SIP. This helps you build wealth over time, and the best part is that it's not affected by short-term market fluctuations. SIPs operate on the very basic rupee cost averaging, insulating the investor from the vagaries of the market and helping him buy the product at different price points at various periods. Besides, compounding is working in your favor. And you get growth exponentially. You can begin investing as low as ₹ 500 every month, thus affordable for everyone.

If you play safe, then recurring deposits could probably be the best avenue to get returns. In RDs, a certain sum of money is deposited on a monthly basis for a particular tenure, while returns accompanied by an assured interest rate will be given. This product will suit those aiming for security in investment with complete assurance of the return quantity. Returns under RD are assured without market fluctuations. RD helps a person maintain his discipline as one has to deposit certain sums of money every month on regular dates.

People who want to earn more but do not want to compromise on safety have other options like Flexi Fixed Deposits and Sweep-in FDs. In the case of Flexi FDs, additional money in the savings account is transferred to an FD and fetches better interest than a simple savings account. Similarly, Sweep-in FDs provide liquidity, as one can withdraw the money when in need, but at the same time earn a higher rate of interest on one's savings.

Another easy way to automate your savings is through automated transfers between accounts. You can set it up so that part of your salary goes into a savings account automatically every month. In this way, the money intended for saving is put aside before you have the opportunity to spend it. It's like paying yourself first and makes saving without thinking about it that much easier.

Employers also provide options of automated savings, like EPF, wherein a predetermined percentage of your salary is automatically deducted and transferred into a retirement savings account. Likewise, the NPS facilitates savings for retirement by means of deductions.

Other than that, there are plenty of digital tools and apps available nowadays to make saving a lot easier. Several apps round off your daily expenses to the nearest ₹10 or ₹100, save the balance, while some let you set financial goals and automate savings for such needs. These can add up with time, all without needing you to intervene after you have set this up.

Conclusion

By starting small, you would be able to pace yourself till your financials improve toward increasing the amounts. Second, automating savings towards different goals be it a SIP for creating wealth or RDs to get fixed returns, besides setting aside in an emergency fund that happens automatically while keeping you on track in a non-aggressive manner, will not disturb your lifestyles. Automating your savings makes it less tempting to spend the money, and it keeps you on track with your goals. In the next chapter, we’ll explore how inflation impacts your savings and discuss strategies to protect your wealth from rising costs. Stay tuned!