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Business News/ Money / Personal Finance/  World Thrift Day 2023: How to save money through RBI Floating Rate Savings Bonds

World Thrift Day 2023: How to save money through RBI Floating Rate Savings Bonds

Promotion of savings is the first step to amassing the much-desired wealth. You cannot invest unless you start saving enough. Saving is a prerequisite to investing, a habit synonymous with being thrifty and living an inexpensive life.

World Thrift Day: Saving money is the first step to reaching your financial goals.Premium
World Thrift Day: Saving money is the first step to reaching your financial goals.

Remember when your parents used to advise you to be thrifty with your money? Well, there is the “World Thrift Day" assigned for the same. Observed on October 30 in India and October 31 worldwide, people ardent with their money highlight the need to save money and practice being economical at every step of their lives.

Why save your money at each step?

Numerous factors can lead to insufficient savings. Some individuals may find it challenging to save due to limited income after covering essential expenses. Others may grapple with existing debts they’re striving to settle, while some might simply not prioritise saving money. Nonetheless, saving money, even if it’s just a small monthly amount, offers several advantages. Savings can enable you to:

Safeguard against unexpected expenses: When unforeseen financial burdens arise, such as unexpected medical bills or car repairs, your savings can provide a safety net, sparing you from accumulating debt.

Achieve financial objectives: Be it purchasing a home, launching a business, or retiring early, savings can expedite your journey toward accomplishing these goals.

Enhance financial security: Having a financial cushion provides peace of mind and fosters better sleep quality, knowing you’re better prepared to weather life’s financial challenges.

Saving through FRSBs

How you save depends on how much money you want to amass for a secure future. Not all investors choose the same saving and investment options. Even the right investment option can help you to save more than mere bank deposits that yield meagre returns, despite the prolonged nature of the savings. As an illustration, cautious investors are currently opting for Floating Rate Savings Bonds (FRSBs), 2020 (taxable) via the Retail Direct portal.

These bonds represent a category of debt securities released by the RBI. They provide a safe and dependable investment avenue, featuring a floating interest rate that undergoes a reset every six months. The interest rate on FRSBs is tied to the National Savings Certificate (NSC) rate, augmented by an additional 35 basis points.

These bonds, bearing interest and non-negotiable in nature, are issued by the central government and have a seven-year maturity period from the date of issuance. Senior citizens have the option to redeem them prematurely after seven years. They serve as an attractive investment choice for those seeking a secure and stable investment opportunity featuring a variable interest rate.

More saving options on the RBI-Retail Direct Scheme

The RBI-Retail Direct Scheme, inaugurated by the Prime Minister on November 12, 2021, serves as a comprehensive platform designed to streamline the process of individual investor participation in Government Securities (G-Secs). These G-Secs are a good way to save and invest your hard-earned money.

Within the framework of this initiative, individual investors have the option to establish a Retail Direct Gilt (RDG) Account with the Reserve Bank of India (RBI) via an online portal. Once the account is activated, investors gain the ability to engage in primary G-Sec auctions and execute G-Sec transactions in the secondary market.

The RBI-Retail Direct Scheme presents various advantages to retail investors, encompassing:

Direct G-Sec access: Investors can now directly invest in G-Secs through the RBI, bypassing the need for intermediaries.

Streamlined investment process: The online portal simplifies the process of opening an RDG Account and investing in G-Secs for investors.

Cost-efficiency: The RDG Account incurs no account opening or transaction fees, offering a cost-effective investment avenue.

Enhanced safety: G-Secs are widely recognised as one of the safest investment options in India, backed by the unwavering faith and credit of the Government of India.

Retail investors can utilise the RBI-Retail Direct Scheme through the following methods:

  • Participating in the primary auction to invest in newly issued G-Secs.
  • Purchasing G-Secs from fellow investors in the secondary market.
  • Retaining G-Secs until maturity to receive the scheduled interest payments.
  • Selling G-Secs in the secondary market before maturity to capture the prevailing market price.

How to ensure regular savings?

Some people find it difficult to save money. They often complain of not having set aside enough to save and invest, thus, causing them to lag behind while trying to reach their monetary objectives. If you find yourself not saving enough money, there are several steps you can take to initiate the process:

Develop a budget: Establishing a budget allows you to monitor your income and expenses, providing a clear picture of your financial flows.

Define financial objectives: Once you’ve identified where your money is allocated, you can begin setting financial goals, such as saving a specific amount each month or reducing your debt.

Automate savings: Simplify the savings process by arranging automatic monthly transfers from your checking account to your savings account. This way, you’ll save money without requiring constant attention.

Trim unnecessary expenses: Scrutinize your budget closely to identify areas where you can cut back on non-essential spending. This may entail dining out less frequently, discontinuing unused subscriptions, or seeking out better insurance rates.

Some additional suggestions to ensure consistent savings include:

Set achievable savings objectives: Avoid setting overly ambitious goals that might lead to discouragement. Begin with a modest savings target and gradually increase it as you become more comfortable with saving.

Cultivate a savings habit: The more you practice saving, the more natural it will become. Strive to save money regularly, even if it’s just a small sum each day.

Resist dipping into your savings unless absolutely necessary: Once you’ve saved, refrain from spending the funds unless it’s absolutely essential. This discipline will accelerate your progress toward meeting your savings objectives.

Celebrate your achievements: When you reach a savings milestone, take time to acknowledge and celebrate your success. This will boost your motivation and encourage you to maintain your savings efforts.

Saving money necessitates dedication and commitment, but the long-term benefits make it worthwhile. By building your savings, you can attain your financial aspirations and enjoy a more financially secure future.

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Published: 30 Oct 2023, 03:51 PM IST
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