Saving is something we learn at a very young age, and investing is something we pick up along the way. It’s also something that most of us shy away from, due to the complicated aspect of calculations, interest rates, taxation and returns. But, in fact, savings is a concept that we have learnt earlier in our lives!
Who doesn’t remember that little coin box, tucked away in a corner of the room? It was one of the early lessons in saving, putting aside a rupee or two each day, only to break it open someday to buy ourselves a little treat. The lesson is patience; there are rewards for every little bit of money saved over the long term.
But growing older, with bigger dreams (and fewer coins) the coin box soon collected dust as our savings were directed towards the bank into fixed deposits. And while a bank fixed deposit did offer some growth, it didn’t do much to fight another evil, that of inflation. So was the coin box just a childhood fallacy? Not really!
With growing needs, your coin box too must grow!
What if your coin box grew in size with every rupee you put into it? And the day you broke it open, you would have much more that you actually put into it! This special coin box is exactly what a Systematic Investment Plan (SIP) does.
And that is the difference between investing and saving. While saving does little to grow your money, investing gives your money the opportunity to earn interest and grow over time. Investing in an SIP is just as easy as putting money into a coin box. The difference being, even a sum as small as Rs 500 each month invested in equities, earns interest which is compounded over time to earn more and create wealth in the long term! An SIP also helps your investment overcome the effect of market volatility and inflation over time.
You only need to make small, but regular investments over a long period of time, and continue to review its performance. So while your money earns interest, that interest in turn earns more interest to give you the potential for robust returns through the power of compounding.
Another thing to note, just like your coin box got you saving at an early age, the sooner you begin investing in an SIP, the more time your money will get to undergo compounding and grow. You can also customize your SIP investment to match your goal based on the time and amount required. So for your long-term goal, for instance, a small amount of Rs 2,000 each month at an interest rate of 10% p.a. could grow to over Rs 15,00,000 over 20 years and to more than Rs 45,00,000 in 30 years!*
So the next time you open your coin box, you can reward yourself with more than just pride, your simple habit could be worth a fortune! Remember, fat salaries and investment jargon don’t make money. Simple SIP investments towards each goal can make you richer through your best memories of childhood.
*All the above calculations are done internally. The illustrations mentioned above are for information purposes only and should not be construed as an investment advice. Calculations are based on assumed rates of returns on your investment and actual returns on your investments may be more or less. Annual recurring expenses have not been factored into the calculations and they could reduce the returns on investments.