We live in an age of sky rocketing prices for not only big-ticket items like cars and homes but even basic necessities such as food and clothing. In such a situation, the ability to generate savings using constrained resources is truly a skill worth acquiring. With respect to how much savings will be enough, 7 figures in savings or the million rupee mark is probably a good goal to start with. The other thing to keep in mind when determining your savings target is to set a time duration within which your savings target is to be achieved. In this respect, a 6-year period is probably a good idea as it would allow you to reach your savings target with relatively low risk.
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Let’s Do the Math
In order to reach your 7 digit savings target, you will definitely need to invest your money into ventures that feature returns much higher that the interest rate offered by the low risk options such as PPF and tax-saver bank fixed deposits. In many ways, the highest return is through equity investments, but not everyone is comfortable with directly investing into shares, stocks and bonds. In such a case, mutual fund investments are definitely the more reasonable alternative.
You do have the option of making yearly lump sum investments, but if you have an issue with ensuring regular savings, a Systematic Investment Plan (SIP) can save your day. In the following table, we have provided our calculation of the million rupee mark considering a 12% interest rate using an SIP. In this case we have started with a monthly SIP of Rs. 10,000 which is increased by Rs. 1,000 every year from the second year onwards.
Table1. Year-on-year growth of an SIP investment that is increased by Rs. 1,000 every year*
| Year | SIP Amount/month | Total Savings During the Year | Total Investment Value at end of year |
| 1st Year | 10,000 | 120,000 | 126,825 |
| 2nd Year | 11,000 | 132,000 | 282,417 |
| 3rd Year | 12,000 | 144,000 | 470,425 |
| 4th Year | 13,000 | 156,000 | 694,959 |
| 5th Year | 14,000 | 168,000 | 960,652 |
| 6th Year | 15,000 | 180,000 | 1,272,724 |
*Values in the table are indicative (decimals removed) and based on a constant growth rate of 12%, which would not be possible in real-life scenarios.
From the above calculation, you can see that generating 7-digit savings is definitely possible provided you put aside the SIP amount every month, however you might be wondering how you can actually manage to generate Rs. 10,000 and above in savings every month. In the following section we will discuss some tips and tricks regarding how you can reach your monthly savings target.
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Saving Tips That You Can Bank On
- Save first, spend later: By prioritising your savings, you take the first step towards achieving the savings goal you need to reach.
- Make a budget: Do you know how much and on what you spend every month? Listing down your planned and unplanned expenses will help you be more in control of your finances.
- Wait before you buy: Noticing how easy it has become to shop and place orders online, we often tend to go overboard when it comes to shopping. Next time when you shortlist something to buy, wait for 48 hours before actually buying. This way you will be able to avoid most of your impulse purchases.
- Chalk out your financial goals: Like everything else, even savings require a goal. Decide what you want to save for — is it a new bike or an international vacation? Having a goal in mind will keep you motivated.
Here is a List of 10 top Performing SIP Mutual Funds to Invest in India 2020
| Fund Name | 1 Year Returns | 3 Year Returns | 5 Year Returns |
| ICICI Prudential Bluechip Fund | 10.66% | 13.26% | 10.52% |
| DSP Tax Saver | 15.80% | 13.36% | 11.99% |
| Franklin India Equity Fund | 3.95% | 9.15% | 8.29% |
| ICICI Prudential Value Discovery Fund | 2.24% | 6.60% | 6.93% |
| Axis Long Term Equity Fund | 16.67% | 17.99% | 12.47% |
| Nippon India Tax Saver (ELSS) Fund | 2.29% | 5.32% | 4.47% |
| DSP Equity Opportunities Fund | 12.42% | 12.44% | 11.92% |
| Motilal Oswal Long Term Equity Fund | 15.82% | 14.49% | – |
| Aditya Birla Sun Life Pure Value Fund | -8.09% | 2.54% | 5.54% |
| HDFC Equity Fund | 6.54% | 12.06% | 8.53% |
*3 year/5 year returns are annualised. Data based on the NAV of direct-growth variant of schemes as on January 08, 2020