Time was when I never thought about the future and just lived for the present. But soon after I got married my parents started telling me to save for the future, because the future does not take care of itself if you don't take care of it now they would tell me.

Initially, I found it all so bugging. Why do they keep on telling me to save for my old age when I am so young, I have all the time in the world to save. So my parents sat down to explain to me the importance of saving in one's youth in order to enjoy the fruits of one's labour in one's old age. This is what they told me.

It is never too early to plan for retirement. In fact, the sooner you begin the better your chances of having a secure, stress-free old age wherein one can afford to nurture your hobbies and also avoid being a liability for your children.

This point struck home more than anything else. If you don't love yourself at least you love your children and you owe it to them to save for your old age well in advance so that you are not a liability for them, so that if the need arises you can actually help them and also leave a lot for them behind when you go. So how does one go about ensuring that this happens.

Well if you start saving early in life, your money will benefit from the power of compounding and tax-deferred growth, i.e. over the years the interest that you have earned on the original investment also earns money. Thus the longer you let your money grow, the more you benefit from compounding, especially if it is spread over 20 to 25 years.

So to get this benefit start early. And the best is that when you start early you don't have to start saving huge amounts to have a substantial amount for your old age, which can be achieved by saving small amounts. But, be warned, to achieve this you have to invest very wisely.

Invest in schemes in which the dividend or interest can be reinvested and which is available only at maturity. This will help save for long-term needs and the savings will benefit from a tax-deferred growth, i.e the investment is only taxed at maturity, when one withdraws.

The compounding effect is mitigated if tax is deducted or paid on the income before maturity. This is because the interest for the post-tax period is computed on the accumulated amount net of tax. Clearly, the interest as well as the net amount one receives on maturity will be more if the money is compounded without getting depleted by heavy taxation every year.

So choose instruments that defer payment of tax as much as possible. And if you can invest in a scheme which defers taxes till maturity so that you get the full benefits of compounding then there is nothing like it.

But you must remember it is not just investing wisely in schemes which will get you there. You also have to resist the temptation of putting your hand in the cash stashed away for the future at the slightest hint of monetary trouble. So don't break into saving instruments set aside for your old age as it dilutes the effect of compounding.

Also one has to think about inflation while investing. If you feel that Rs2 million will be enough for you to retire happily, think again. Twenty-five years down the line its value will be depleted. It will amount for today's Rs1 million. So to tackle inflation, maintain a diversified investment portfolio, consisting of instruments that will give you regular returns, as well as those that offer growth.

Fixed deposits, bonds, debt schemes of mutual funds will provide you with a regular income; equities, real estate and equity-oriented mutual fund schemes will provide a safe enough cushion against inflation.

Also do review your retirement plan as life goes on and your income increases. There is a little thumb rule you need to follow if you are to retire happily. What-ever your income try to save at least 30 per cent of your income for your old age.

The writeris a journalist based in New Delhi.