Reason Behind Why Middle Class People are not Saving Money

 

Even middle class knows the importance of saving small money and know how to save and where to save, they still do not save the money. I researched on it and I find following reasons. 

1. Not Give Value to Small Saving

First and main reason is not giving the value of small saving. They start thinking negative. They says

If I save Rs. 100 per month for my kid of 8 years and after 10 years it will become about Rs. 10,000 but I need Rs. 2 to 5 Lakh for his study. Due to this, they stop their saving and spend all the money. 

If they start to think positive, they can save more

a) They have to think even, they have saved low money like Rs. 10,000 but with this small money, they can also catch the big opportunity. There lots of things which he can get at small money and sell at big rate. 

b) Sometime people are in debt, if you have small money, you can invest same money to buy their property at cheap rate and sell at high profit. 

c) If you can save small money, you become habitual and you can save big money with this. 

Always foc

2. Low Confidence due to Ignorance about Compound Effect 

They do not understand the effect of compound. Here, compound means compound interest. They forgot it. In above example, middle class person can see only Rs. 10,000 after 10 years with his saving of Rs. 100 per month. 

They forgot, he will get compound interest on it. 

Suppose compound interest is 5% annual 

End of one year 

1200   + interest 60 = 1260

Now, you will get interest on interest in second year 

1260 + 1200 + 2460 * 5% - Rs. 123 = 2583

Now, you will get interest on interest in 3rd year 

2583 +1200 + 3783*5% - 189.15 = 3972.15

You are seeing that from second year, you are getting interest on your free money

you are getting interest second year to 10 year on  Rs. 60 which is your first year interest 

Means with saving, your money work for you and you are enjoying relax your life and you go to the level of rich people.

Even, you get 10,000 save plus interest of  RS. 450

Total amount is Rs. 10450 and again, you FD in Govt. account for 13 years, you will get double of it

Means you will have Rs. 20900 and you have just invested your main principle Rs. 10,000 and rest earned by your interest. For this, you did not work hard. 

3. They Never Make Good Plan

Middle class people thinks always today life. That is great but they never make the good plan to manage future big expenses.

They never think

how to manage big fees of their kids in college

how to manage the bill of marriage of their kids

how to survive retirement life

how to give medical bills if they face any accident. 

If they start to think, they can start to plan of saving 

4. They Increase Useless Expenses

All middle class people wants to live in comfort life. For this, they took loan and captured in paying its compound interest. They buy ac, cooler, freeze pressure cooler exhaust and tv led. They waste money and do not make budget. 

5. They Think like Middle Class

They think like middle class. They never think like rich people. That is reason they will become middle class all the time and never start saving of money. 

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