India's household savings hit 50-year low: Easy tips to boost your savings

Savings act like a safety net during these tricky times, and we can imagine what happens when that net is vanishing.

Did you know India's household savings have hit their lowest point in 50 years?

A savings rate of 11.5 percent of the gross domestic product (GDP) just two years ago (2020–21) is now at 5.1 percent (2022–23), and it doesn’t seem to be going up any time soon. While this may sound like some boring national-level statistics to most of us, this is something that directly affects us.

Have you noticed in recent times the rather fast-paced rise in the prices of things that we regularly buy? Well, that’s the soaring inflation hitting us almost every day. This has made us take out more money faster from our pockets than we were doing earlier for buying essential and discretionary items, or even for simply wanting to go out to have a bit of fun. So, we spend more now and hence save less.

Why the decline in household savings?

There are two major reasons why our savings have taken a nosedive.

One biggie is ‘inflation’, as mentioned earlier. Remember when your favourite snack cost half as much as it does now? Well, that's inflation at work, making it harder for you to save. There are many reasons for it to be happening, but that’s a separate topic by itself.

Then there's the matter of ‘rising debt’. It's not just you, but many of us are borrowing money to pay for important things like education and healthcare, where costs are rising even faster than the normal rate of inflation. Things have come to a point where sometimes people are also borrowing for daily, normal expenses like groceries. That’s why the Buy Now, Pay Later (BNPL) wave is on a crescendo — and that's surely not a good sign for our savings.

What's the scoop on this savings decline?

First, when people save less, the government treasury gets less money from us, and it's like the country's money engine running on low fuel. So, there needs to be more money to help new businesses grow and to build new things like roads and bridges. That hits the brakes on our country's economic growth.

Plus, when you don't have savings, life's surprises can hit you harder. Imagine losing your job or getting a surprise medical bill when you're already running low on cash. Savings act like a safety net during these tricky times, and we can imagine what happens when that net is vanishing.

And guess what? If you're not saving, you might end up borrowing and owing money to others. This borrowing of money can become a never-ending cycle, sometimes even a vicious cycle, making it even harder to save in the future.

So, how can we get our savings game back on track?

Also read: Don’t have an emergency fund yet? Here are steps to get you started

Easy tips for everyday life

Let’s first look at some everyday tricks everybody can do to save more:

• Cook at home: Eating out can be pricey. Cooking at home is like getting a big discount on your food bill.
• Share rides: Think of carpooling like a mini-adventure with friends, and you'll save money on transportation.
• Shop smart: Before buying something, look around. Just like finding the best deal on a video game, you can hunt for discounts in real life.
• No more impulse buying: Resist those tempting treats at the store, online or offline. If you don't need it, you don't buy it! Be more careful about this with the festive season here.
• Cancel unwanted subscriptions: Remember that music streaming service you barely use? Cancel it! You'll save some extra cash. Look around, and you’ll find more such things lurking in the corners.

• Plan your spending: Think of your budget as your treasure map. When you track your income and expenses, you can spot where to cut back and stash away more savings.
• Automate savings: Imagine a little robot that moves your money from your spending account to your savings account every month, without you thinking or even knowing about it. It's like magic!
• Set goals: Picture this: your dream vacation, your own home, a lovely gadget, or a cosy retirement. Setting goals gives you something to aim for, like a target in a game. This can encourage you to add to your savings over time.

• Keep an eye on inflation: Remember that government-provided inflation figures do not indicate the inflation rate that you face in real life because you generally buy more products and services than the official inflation calculator covers. So as long as you do not visibly feel that prices are cooling, do not breathe easy.
• Ditch debt: If you're already swimming in debt, keep your guard up. There are many ways you can get onto safer shores by cutting your loans: retire costlier loans as your budget comes under control, pay off small amounts whenever you can, or use a combination of both methods. And of course, do not splurge until you’re breathing easy.

Ready to get started?