The importance of savings and investments, to achieve financial goals

Financial Planning

In this article you will learn about

  • Differentiating between savings and investing
  • The importance of savings to achieve financial goals
  • Systematic approach to savings and investments

Time was when savings meant the leftover from your income after expenditure. Smart savers on the other hand first save a significant part of their income before they use the leftover towards expenses. With this simple shift, they are they able to save regularly and save more. But, simply saving money is no more beneficial, especially when inflation eats into it.

For example if you keep Rs 10,000 with you for a decade when the inflation rate is 6%; at the end of the decade it would be worth just Rs 5,584! At a time when fixed guaranteed returns from savings bank account and fixed deposits are steadily going down, your savings need to earn inflation matching gains to retain its future value. However, you also have future financial goals, which require gaining in value to reach the value that you need.

Financial goals mean different things to different people. It could be saving enough for a wedding or reducing debt or just saving towards retirement which could be two decades later. The importance of setting financial goals is to bring meaning to your savings and channelizing the savings towards reaching your financial goals. It helps to have some idea of what you want to do with your savings, which can be effective if you have clearly defined goals. So, instead of listing a foreign family vacation in 2022, it will be better to attach a cost to it – Rs 4 lakh in 2022 for a European vacation.

There are several online tools available which can help you calculate the money you need to save each month to reach your financial goal, based on your expected returns from such savings. Regularly saving and investing this sum in a disciplined manner over time, can help you reach your goal. You could invest in mutual funds for the wide investment choice across asset class that they offer to meet your risk profile and investment time frame. There are funds available that are suited for short-, medium- and long-term financial goals and with varying risk grade.

Moreover, you could use a Systematic Investment Plan or SIP to invest in mutual funds for its convenience and structure. As most people receive a monthly income, they can use a monthly investment cycle towards their financial goals by opting for the SIP route to investing in mutual funds. This takes your savings discipline a notch up – you just don’t save regularly, you also invest regularly. For instance, if you are looking to build Rs 1 crore retirement corpus 20 years from now; you need to invest Rs 10,010 each month earning 12% annualised returns to reach this target.

Saving money is the stepping stone to achieving financial security. To have control over your finances, develop a smart savings habit, to secure your current as well as future financial life. Develop the habit to automate your savings and investments to reduce the temptation of unplanned expenses. You will find your savings work for you be reaching the right mix of investments that will facilitate you achieve all your financial goals in a timely manner.

Next steps


  1. List out your financial goals
  2. Find out how much you need to save month
  3. Start a separate investment plan for each financial goal

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All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (‘RMF’). For more info on KYC, RMF & procedure to lodge/redress complaints, visit This is an investor education and awareness initiative by PGIM India Mutual Fund. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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