What is savings?

Saving is an activity of setting aside a part of the current income to meet future needs. Savings is income not spent or even the postponed expenses. Saving your money offers you a safety net against financial emergencies. You must invest the money you save to create wealth in the long-run.

Saving helps in creating wealth, reducing debt, and leading to financial security. Savings help you take calculated risks with your investments. You have money set aside for a financial emergency. You may invest with greater freedom to achieve your financial goals.

Saving money helps you to create an emergency fund. You must have at least six months worth of living expenses in your emergency fund. You can use the money if you lose your job or even for a medical emergency.

You may invest the money you save in a savings bank account, fixed deposit, PPF, or NSC according to your risk tolerance. These are fixed-income investments that pay you interest on the deposit. An aggressive investor may put the money in an equity mutual fund. It is an investment that may offer a higher return on investment over the long-term.

What is a savings calculator?

The savings calculator is a simulation, that shows you the amount you must save each month or year to attain your financial goals. The calculation depends on the amount you set aside. It also depends on the duration of the investment, and the expected rate of return on the investment.

The savings calculator consists of a formula box, where you enter the amount you need, the time-frame of the investment, and the expected rate of return. The savings calculator shows you the amount you must set aside each month to attain the financial goal.

How do savings calculators work?

Let us understand the working of a savings calculator with an example. You need Rs 10 lakh after 10 years. You have assumed an expected rate of return of 8% per year on your investment. You have currently not saved any money for the financial goal.

You may use the PMT Function in the Excel Calculator where you enter the rate = 8/100/12. (Convert to monthly rate).

You must calculate the period of investment in months = 10*12 = 120 months.

Put PV = 0 and FV is Rs 10,00,000, which is the future value of your financial goal.

The savings calculator shows you the investment required per month for the financial goal as Rs 5,430.

How to use the ClearTax Savings Calculator?

You will have to estimate the future value of your financial goal before using the ClearTax Savings Calculator. You may use the ClearTax Financial Goal Calculator to calculate the future value of your current goals.

The ClearTax Savings Calculator is an easy-to-use tool, for calculating the amount you must save each month to attain your financial goals.

• You must enter the amount you need for the financial goal using the slider.
• You then use the slider to enter the number of years to attain the financial goal.
• If you have already invested some money for the financial goal, you may enter the amount.
• You will have to enter the expected rate of return on the investment using the slider.
• The ClearTax Savings Calculator will show you the amount to save and invest each month to achieve the desired goal.

Benefits of Using the ClearTax Savings Calculator

• The ClearTax Savings Calculator shows you the amount you must save right now, to achieve your financial goals.
• It helps you to manage expenses and save for the important milestones.
• You can select the best investment based on the risk profile and the duration of the financial goal.
• The calculator helps you to save money for a significant purchase.