How should you act to provide the best care for this bundle?

Money in hand or your savings represent your hard work that went into making them and the pains that you might have taken to avoid spending them. How should you act to provide the best care for this bundle?When is the quantum of money minor, not to spend sleep over it? And at what point should you certainly worry over the quality of your money management?How much are you able to set aside every month? How much is it worth in a year's time, 2 years from now and say 5 years from now?Let's take an example.
If you were able to save Rs 5000 a month, then after one year this savings would become Rs 60000 plus Rs 1625 of interest at 5% interest per annum, i.e. a total of Rs 61,625.Two year later this sum would become Rs 61625x2 plus Rs 3082, i.e. Rs 126,332.Five years from now, this regular stream of saving will amount to Rs 340,517 if your interest rate remains 5% for the period.
So, even Rs 5000 per month is not an insignificant amount after all.
Now let us understand one very important aspect. The rate of returns can go up and that too substantially. But the most important aspect to consider is: when would you need this money in normal course?
Now the most crucial timeline is 2 years from now. Are you able to see beyond that? Consider your milestones like going for a house purchase or starting a family, etc when you may need to draw from your savings. If at this point in time, you are confident that your savings need to work for more than 2 years, you will have to give more serious attention to managing your investments.
There are two approaches to the whole thing.
Where do I park my money? Or, which financial product should I buy? These belong to a transaction oriented thinking akin to buying any other product that you do in other areas of your life.The other approach is to take a more complete view of your finances and concentrate on a more healthy financial position and to develop effective financial planning strategies taking into account fundamental rules of risk and rewards and which will give more emphasis to your personal unique needs over a very long period. Financial products or individual transactions will have to fit into this broad framework.
If you are saving money to use most of it within the next two years you will not lose much by adopting a transactional or product centered approach. Because in the shorter time span attempts to hike your returns through more aggressive steps will entail courting unacceptable levels of investment risks.However, you need more thorough considerations and care for a longer period. Risks and time periods are related to each other. And risks tend to come down as time periods become longer.
Time period is the most important parameter in personal financial matters and you will lose significant opportunities to grow your savings if you do not take good care of your long run savings.
So ask yourself the carefully considered answer to this key question.