When it comes to savings, there are several strategies people follow. We know it is straightforward to do some savings if we want but if we follow these strategies, we will be able to do some effective savings and we will not get into trouble when we have any financial needs. I recently came across this bucket strategy used by people to save money.
It is very easy to understand if we compare it with the traditional way of saving money by our grandmother. In India, there was a practice of saving money inside the kitchen in specific containers. Housewife used to do this whenever they got some money from their husband. They allocate one container for every purpose. When there is a specific need in the family, they open a specific container and give the money. We can even see this strategy displayed in some of the movies and this has also worked out very well.
Though we have modernized in different ways, following this bucket strategy to save money is a great thing to do. If we have some goals in mind or a short-term plan, we can start saving money towards meeting that goal. Sometimes the goals can be a bigger one or a small one. If we save money in a bucket towards that goal and slowly achive that goal, it will be good compared to bringing money from different places and struggling with money management.
Bucket savings can be something to do with Children's education, planning a trip, buying a car, etc. For children's education, we can start saving when we get married or when our wife is pregnant. Today the cost of education is very high so starting it early is a good thing.
When we are saving the money for the future, we should also consider the inflation. For example, if we are expecting the college fees to be 5 L per annum today, it can keep increasing every year and when the child is ready to enter college, the fees might be somewhere around 20 L because of the inflation or continuous demand and supply. When we are saving money, we should also consider this and save accordingly.
We have to be very careful while spending the money. When we are saving money for a specific purpose, we shouldn't be spending the money on a different purpose. Some people may not have the financial discipline. When they save the money for some reason, they spend the money for a different purpose and their financial planning gets messed up. There should always be a plan to have an emergency bucket which should keep getting filled and we should never touch the emergency bucket. Only then we will be able to save the other buckets when there is a financial need.
When we are done with saving enough for one bucket, we can close the bucket and focus on the other buckets. This way we can have multiple bucket planning and when the time comes, we can use the funds from that specific bucket for the needs.
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