Inflation is one of the major issues faced by people who want to save money in the future. Everyone works hard, earns money, and keeps it in a savings account at a bank. However, very few people know that mere savings are not sufficient. The value of money goes on decreasing year by year with an increase in prices. A gradual rise in prices is called "inflation."
As a result of inflation, the same money cannot buy much in a few years. This makes financial planning a necessity. One of the best means for financial planning is investment plans. With proper selection of investment plans, your finances can increase at a pace greater than that of inflation.
Understanding inflation simply
Inflation basically means the cost of living rises with the passing of time. That which you would be able to get with ₹1,000 ten years back would cost you ₹2,000 now.
For instance:
● School fees rise each year
● Healthcare costs rise each year
● Rent goes up every year
● Grocery expenses rise every year
Secondly, if your income or savings are not increasing at the same rate, then your buying power will decrease. That is why inflation erodes the value of your money silently.
Why saving money in a savings account is insufficient
Interest rates for most savings accounts normally range from 3% to 4%.
However, the inflation level in India is generally between 6% to 7%.
What this means is that your money is growing at a rate of 4% and simultaneously shrinking or losing value at a
Well, the truth is, you are actually losing 3% every year.
Thus, even when the amount in your bank accounts rises, the actual price of your money is reducing. This is the reason why those who save their funds without investing have financial difficulties when they get older.
What are investment plans?
Investment plans are financial instruments used for increasing the value of your money over time by investing it in various kinds of resources, such as:
● Shares of companies
● Bonds
● Public securities
● Market funds
These investments rise in tandem with the economy. For extended periods of time, they generate greater returns than savings accounts. This accelerated growth will allow your finances to overcome inflation.
How investment plans beat inflation
If a portfolio is planned properly, it is able to yield an average return of 10% to 12% every year. Even with an inflation level of 6% to 7%, there is positive growth.
For instance, if your return rates are 11% and the rate of inflation is 7%, the real return rate will be 4%. This implies that your money will not only be safe but will be even stronger.
This is why individuals have come up with an investment plan in order to ensure the future.
The role of compounding
Compounding refers to the mechanism wherein your gains begin generating gains themselves.
It is considered the prime force behind wealth creation.
In a situation where you invest every year, the amount grows slowly at the beginning, and after a certain period, it accelerates drastically because every year, the amount to be invested increases.
For this reason, it is extremely important to start early. Even a small amount of money can generate huge wealth over time.
Why life-based investment plans are effective
Life investment solutions provided by reputable firms such as Bajaj Life are meant to offer both protection as well as growth for money. Such insurances offer protection to your family by securing their future while ensuring that your investments grow simultaneously.
Bajaj Life Investment Plans are helpful to:
● Build long-term wealth
● Manage financial risks
● Secure the family’s future
● Make long-term plans for things like education, retirement, and healthcare
These schemes instill financial discipline and help make steady investments, which are needed in order to overcome inflation.
Long-term effects of investing
If you invest ₹5,000 every month for a period of 20 years, then the total amount you'll be investing is ₹12 lakh.
At an average return of 11%, the final value can rise to almost ₹50-60 lakh. There is no magic happening here. It is a product of time and compounding. This is how the average person creates secure finances over time.
Common mistakes people make
Investors often wait because they believe that they do not earn enough money.
The biggest mistake is simply to wait.
The second mistake a person can make when investing is fear. There may be those who fear the fluctuating nature of the stock market when investing. However, the longer one invests, the less risky it becomes.
The third error is a lack of planning. People end up investing in random investments when they lack guidance and fail to follow investment schemes offered by genuine investment companies such as Bajaj Life.
How to start investing smartly with SPDR
Early intervention is key. Regular investments. Whenever your income increases, it is important to increase your investments too. Once a year, review your plan. Invest long-term. It is better to pick investment schemes depending on your goals and comfort level of risk. Reputed financial providers such as Bajaj Life have schemes according to various life stages and financial backgrounds.
The earlier you start, the better
Inflation can be avoided, but economic loss cannot be eliminated. If you invest wisely, your money will grow at a faster pace than the inflation rate. Your future will be protected. Organisations such as Bajaj Life offer well-structured and trustworthy investment options, helping an individual gain financial stability, growth, and security for their family. The earlier you start, the better off your financial future will be.