The approach of a salaried individual to save money is different from that of a self-employed or businessman because salaried professionals have a fixed monthly income, unlike the latter. Due to this, they have to manage savings and investments along with their expenditure within a stipulated income. The most effective way to save money is by investing. For a stable and secure future, the most important thing to take care of is – your finances. A lot of people rely on savings plans, while some people choose to invest money in government savings schemes. Nevertheless, the crux is – saving money is the best way to create a financial cushion against the unexpected economic blows.
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Salaried individuals need to consider time, risk, income growth, and return expectations as per their income while searching for the best savings plan in India. One of the biggest challenges for these people is to control their spending. The more control you have over spending, the more money you can save that will eventually benefit you in the future.
Here are five smart ways a salaried professional can save money:
Unit Linked Insurance Plans (ULIPS) are life insurance plans that provide safety of insurance protection with the opportunity of wealth generation. A part of the investment goes towards life cover, and the rest is invested in a fund that is further funded in stocks or bonds. It is considered one of the most popular investment plans in India for a person to enter the stock market and get the additional benefit of life cover.
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An endowment plan is a regular money-saving plan that helps build a corpus and gives guaranteed maturity benefits along with bonuses. It is a kind of insurance plan designed to provide life coverage protection and the chance to grow wealth through systematic savings. It is one of the saving options available for people looking to invest in insurance cover, as well as investment and savings plans in India.
Benefits of Endowment Plans:
Better Returns: It offers better returns on investment as compared to fixed deposits or simple life insurance policies.
Tax Benefits: This plan is a good tax-saving option. Under the Income Tax Act, Section 80C, endowment plans have tax benefits on the annual premium that can be claimed for up to an amount of ₹1.5 lakhs. Under Section 10(10D), the maturity claims or death benefit of endowment plans are completely tax-free.
Accidental Riders: Endowment plans provide the option to add accidental riders that can further enhance the cover. You have to pay a marginal premium to opt for riders. There are various reasons to add a rider to your life insurance policy. And one of them is – it gets more optimized to suit your needs.
Short-period Premiums: These plans are ideal if you want to pay a premium for a short-period and want to benefit from the plan over the policy term.
Liquidity: These plans are liquid. In case the policyholder survives the policy term, then the sum assured amount and other bonuses accumulated during the term period are paid. And if the policyholder passes away during the policy term, then the death benefits are paid to the nominees. The benefits include the sum assured and additional vested bonus.
Investing in your child’s name via PPF or ULIPs offers 80C tax benefits, but income may be clubbed with yours unless it's from tax-free instruments.
Source: Economic Times
Money-back plans are very popular insurance policies as they offer dual benefits of insurance and redemption of money at regular intervals. These plans are mostly opted by individuals who require money at certain intervals of life to meet short-term as well as long-term financial requirements.
Benefits of Money-back Plans:
Protected Savings: The returns in money back plans are guaranteed. Thus, savings in this plan remains safe as the premiums paid are not linked with the ups and downs of capital markets that are uncertain.
Life Insurance: This money-saving plan also provides life insurance cover. In case of death of the policyholder, the nominees get the sum assured.
Tax Savings Benefits: Under Section 80C, all life insurance premiums under the money-back policy are eligible for tax deduction up to a specified limit. The maturity amount is exempted from tax deduction at source as long as the annual premium does not exceed the sum assured by more than 10%.
Secured Investment: A money-back plan is an ideal investment option. This plan safeguards your investment against the risks.
A monthly income plan (MIP) is a type of mutual fund strategy that generates stable income through dividend and interest cash flow. The plan aims to provide a steady stream of income that is suitable to retired persons or senior citizens who do not have other substantial sources of monthly income. However, the monthly income plan is prone to market risks, and the investor can expect a seedy stream of income when the market is strong but could face downstream as well.
Benefits of Monthly Income Plan:
Retirement Corpus: The regular stream of monthly income can be used to supplement your earnings, which will help you have a worry-free retirement life.
Build a Legacy: It is an insurance cum protection plan that offers a long-term investment opportunity to help you build a legacy for your child.
Loan Facility: You can opt for a loan facility to help you manage any contingency.
Maturity Benefits: On survival till maturity, the policyholder will receive an added annual bonus along with the final bonus (if any).
PPF (Public Provident Fund) is a government scheme meant for both salaried and self-employed individuals. It offers financial security, especially during your retirement days.
EPF (Employee Provident Fund) is a scheme designed exclusively for salaried professionals. Under this scheme, the employee and employer contribute 12% (or the minimum of Rs. 780) of the salary amount every month. Both PPF and EPF are eligible for tax exemption under Section 80C. This plan is a must-have for salaried professionals.
Benefits of PPF/EPF Schemes:
Tax Benefits: Returns earned from a PPF account are tax exempted and investments in EPF accounts qualify for tax deduction under Section 80C of the Income Tax Act.
Acts as Retirement Savings: These savings schemes can help you build a retirement corpus right when you start earning. Having solid savings for the retirement days should be one of the most important financial goals.
Return on Investment: Both the savings schemes offer returns on investment. The interest rate on the investment made may vary between the schemes.
Life Cover: ULIPs provide the benefit of life coverage coupled with investment. The life cover will benefit the family of the policyholder in case of their untimely death.
Income Tax Benefits : A salaried individual who wants a life cover with additional tax benefits may consider investing in ULIPs. Under Section 80C, the premium paid towards a ULIP is eligible for a tax deduction. Furthermore, the returns out of the policy on maturity are exempt from income tax under Section 10(10D) of the Income Tax Act.
Long-term Goal Benefits: ULIP is a good investment option to save money for financing long-term goals like buying a house, a new car, marriage, etc. The best returns will be generated if you choose a longer policy period.
Flexibility of a Portfolio Switch: ULIPs are usually designed in a way that allows the policyholder to switch portfolio between debt and equity-based on risk and knowledge of the performance of the market.
A salaried professional needs to save money to achieve short-term and long-term financial goals while keeping up with the evolving needs. Keeping the risks in mind, find the best money-saving plan that will suit your financial circumstances. Weigh the pros and cons of all the savings plans and schemes before investing your money. And it is always considered wise not to put all the eggs in one basket. Hence, create a diverse investment portfolio to enjoy stable returns on your investment while also creating a savings fund.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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