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Contributor‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.
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Ravi, a 35-year-old IT professional from Bengaluru, recently faced a financial crisis when an unexpected medical emergency arose. Despite earning a comfortable salary, he found himself scrambling to cover expenses, realising he had no substantial savings to fall back on.
Ravi's situation isn't unique. A survey revealed that 75% of Indians lack an emergency fund, leaving them vulnerable to financial shocks.
Moreover, nearly 50% of Indians save only between 0 and 20% of their income, and 20% save between 20% and 30%, indicating that a large portion of the population isn't setting aside adequate funds for future needs.
This trend highlights a pressing issue: many Indians are not cultivating sufficient savings, often due to certain financial habits. Addressing these habits is essential for building a secure financial future.
Many Indians spend money without a clear plan, leading to unnecessary expenses and reduced savings. A survey showed that about half of urban Indians follow the union budget every year (47%), and close to three in ten (27%) follow it sometimes. This lack of budgeting means they often don't know where their monthly money goes.
For example, Priya, a marketing executive in Mumbai, earns ₹1,00,000 per month. Without a budget, she spends on dining out, shopping, and entertainment without realising that these add up to ₹30,000 monthly.
By the end of the month, she wonders why she has little left for savings. Creating a simple budget can help track expenses, identify unnecessary spending, and allocate funds for savings and investments. This practice ensures financial stability and prepares individuals for unforeseen costs.
Small daily expenses, often overlooked, can accumulate over time, significantly impacting one's savings. These seemingly insignificant costs, when added up, can amount to a substantial portion of monthly income, hindering financial growth.
Expense Type | Daily Cost | Monthly Total |
Daily Coffee | ₹100 | ₹3,000 |
Cab Rides (20 days/month) |
These small expenses cumulatively amount to ₹9,000 monthly, which is a significant portion of income that could be directed towards savings or investments.
Strategies to Manage Small Expenses
Individuals can enhance their savings and achieve financial stability by being mindful of these small daily expenses and implementing control strategies.
Excessive dependence on credit cards and Equated Monthly Instalments (EMIs) can lead to financial strain. While they offer
immediate purchasing power, misuse can result in mounting debts.
Limiting credit card usage and ensuring timely EMI payments are essential to maintaining financial health.
Many Indians delay investing, believing they have plenty of time to start later. However, time is the most valuable asset for wealth creation. The earlier you invest, the more your money grows through compounding. Take Ramesh, a 25-year-old software engineer, and Sunil, a 35-year-old manager.
If Ramesh invests ₹5,000 monthly in an SIP at 12% annual returns for 20 years, he will have around ₹50,00,000. If Sunil starts the same SIP 10 years later, he will have only ₹15,00,000 in 10 years. The difference is staggering, even though the monthly investment is the same.
Delaying investments means missing out on the power of compounding. Many wait until their 30s or 40s, but by then, they must invest significantly more to reach the same goal. Starting early, even with a small amount, ensures financial stability and long-term wealth creation.
Many Indians live to pay cheque to pay cheque without setting aside money for unexpected situations. Not having an emergency fund can lead to debt and financial stress, whether it’s a sudden medical expense, job loss, or home repair.
Financial experts recommend saving at least 3-6 months’ expenses. For example, if your monthly expenses are ₹50,000, you should have at least ₹1,50,000 in an emergency fund. This ensures that you have enough to cover essentials even if your income stops.
Type of Savings | Liquidity | Interest Rate | Risk Level |
Savings Account | High | 2-4% |
A combination of a savings account and liquid mutual funds works best for emergency funds.
Steps to Build an Emergency Fund
An emergency fund prevents financial panic and gives you peace of mind during unexpected situations.
In India, social pressure often leads to overspending. Many people buy expensive cars, host grand weddings, or upgrade to
premium smartphones to show status, even when they can’t afford it.
While these expenses may impress others, they can drain savings and create financial stress.
Many Indians wait until the last moment to think about tax-saving investments. Instead of planning, they rush to invest in any available option without proper research in March.
This results in poor financial decisions, missed tax benefits, and lower returns. Tax planning is not just about saving money today; it helps create wealth over the long run.
For example, Priya, an IT professional, earns ₹10,00,000 annually. If she doesn’t invest in tax-saving instruments, she may pay ₹1,00,000 more in taxes. However, by using tax-saving options under Section 80C, she can reduce taxable income and increase savings.
Investment Option | Lock-in Period |
Expected Returns
Tax-Free Maturity?
PPF
15 years
7-8%
Yes
ELSS
3 years
₹200
₹4,000 |
Impulse Shopping | ₹500/week | ₹2,000 |
Total | ₹9,000 |
Fixed Deposit | Medium | 5-7% | Low |
Liquid Mutual Funds | High | 6-8% | Low |
*T&C Apply
10-15% |
No |
EPF
Until Retirement
8.50%
Yes
NPS
Until 60 Years
8-12%
Partially
FD (Tax-saving)
5 years
5-6%
No
Proper tax planning ensures you pay less tax while growing wealth over time.
Many Indians do not track their expenses, which leads to overspending and low savings. Without knowing where the money goes, it becomes challenging to plan for future goals. Small, untracked expenses can add to a significant financial drain over time.
Most people assume they spend less than they do. Small purchases—such as ₹100 snacks, ₹200 coffee, and ₹500 online shopping—may seem insignificant but add up over time.
Expense Category | Monthly Average (₹) | Annual Total (₹) |
Food & Dining | 6,000 | 72,000 |
Shopping | 5,000 | 60,000 |
Entertainment | 3,000 | 36,000 |
Travel & Fuel | 4,000 | 48,000 |
Subscription Services | 1,500 | 18,000 |
Total | ₹19,500 | ₹2,34,000 |
An annual expense of ₹2,34,000 could have been used for investments, emergency funds, or debt repayment.
Tracking expenses creates awareness and builds financial discipline, helping individuals save and invest more efficiently.
Conclusion
Saving money is not just about earning more but managing finances wisely. Many Indians fail to save due to poor financial habits like overspending, ignoring investments, and not tracking expenses.
However, small changes like budgeting, investing early, and cutting unnecessary costs can make a big difference.
Focusing on long-term financial security can help individuals build a stable future and avoid financial stress. The key is to start now, even with small steps, and remain consistent in managing money better.
1. Why do most Indians struggle to save money?
Many Indians fail to save due to poor budgeting, unnecessary expenses, over-reliance on credit, and lack of investment planning.
2. How can I start saving with a low income?
Begin by tracking expenses, cutting unnecessary costs, following the 50-30-20 rule, and setting aside even ₹1,000 per month.
3. What is the best way to invest in long-term savings?
SIP in mutual funds, PPF, NPS, and ELSS are great options that offer higher returns and tax benefits over time.
4. How much emergency fund should I save?
Experts suggest saving at least 3-6 months' expenses to handle unexpected financial situations.
5. How do I avoid overspending on social status?
Prioritise needs over wants, set spending limits, and avoid buying lux
