How important are savings in the early stage of your career?

Famous American author H John Poole once said, “You must learn to save first and spend afterwards.” But, unfortunately, people in India are either not aware of the benefits of savings or they are rather unaware of the repercussions of not saving. A study conducted by HSBC in 2015 revealed that Indian people are not good at saving and 47 percent of the working population has not started saving yet, this is even higher than the global average (i.e. 46 percent). In addition, the report also conveys that almost 44 percent working people in the country save money but not on the regular basis. The scenario is even more devastating if we look at the saving habits of the young working population.

Over-optimism Syndrome

Young people do not see the future with pessimism. They do not consider that the economies of the countries can fail or their skills will become irrelevant, taking them out of work, or a similar unsought adverse scenario. Newer gadgets, best TV for a better experience and high-end clothing has become the way for a lot of youth.

For others, travel and leisure are a priority. All of these hobbies or lifestyles come at the expense of the high amount of spending. Yet others need loads of funds to take corrective actions to better their career after taking a course in a costly private college, not really studying enough through the course and eventually landing a stressful sales job. So, a new degree in an international university is on their mind and that too without returning back to their parents for money. With all these things playing on the minds of the youth, any long-term savings are a distant thought.

Only savings help you in crisis

An emergency may come anytime and to stop it from graduating into a crisis, one must have both plans and measures. If you follow the two the result will be 'savings': the optimum antidote to every crisis. Money doesn’t make one’s fate, but it is the major cause of changes in one’s fate. Money doesn’t only help buy goods, it also brings happiness simultaneously. Even the world’s economic centre, the US, couldn’t avert the crisis of recession in 2008–2009, just because of a habit of overconsumption among the youths. Many fell prey to depression and many of them committed suicides due to an unexpected financial crisis in the life. But those who were bestowed with savings could weather the storm safely and successfully.

Today’s saving is tomorrow’s investment

Various studies suggest that people who start saving in the 20s or early 30s enjoy a more comfortable and peaceful life in the old age, i.e., - post retirement age. Over consumption is a disease which is spreading pandemically among the millennials, and its drastic impact will be seen more clearly after 2030 when the maximum population of Gen-Y will join Club Sixty. In behavioural finance, this problem occurs due to lack of self-control and discipline when people fail to anticipate their future needs and long-term goals.

Apparently, the problem seems condonable, but if we study the causes of global economic recession in 2008-2009, then it is the root of entire crisis and PIGS economies are still struggling with the aftermath of the great holocaust. There are incidences when a youth sold his/her kidney to purchase the latest smartphone, it is the height of irrational consumerism. This kind of behaviour is not just harmful to individuals, but it is rather devastating to businesses in the long run, when supply will surpass the demand, and prices will fall gradually, which will lead to a market crash and another dreadful recession.

Savings save future

Consumption is a function of income and investment is the by-product of savings, there should be a balance between the two. High income leads to higher consumption and a proportional increase in the savings, but when savings shrink, investment also declines simultaneously, which causes a big gap between demand and supply, the sudden rise of prices and eventually the inflation. Now, to meet the market demand businesses acquire loans on higher interest rate from the financial institutions, but by that time people adopt conservative buying behaviours, demand falls and supply increases and businesses experience loss as well as high liabilities.

An individual’s cycle of earning changes continuously with respective to age; zero in the teenage, positive during the early years of job, at the culmination between 40 and 50 and it starts declining after 60. If one is reluctant to save money during the greener phase of his/her life, then the scarcity of resources will be evident at the advanced age when an individual’s health and efficiency becomes weaker and weaker every new day. That’s why a sensible person spends money rationally and saves money smartly to secure his/her future.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)