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Saving is the most basic habit that a person is taught by their parents right from an early age. In order to accomplish all the long-term and short-term goals, it is extremely imperative to open and invest in the best savings plan.
People usually put a small part of their earnings in a savings plan regularly, which can help them in securing their future and that of their loved ones. A savings plan is undoubtedly considered the most suitable investment option in India, and many people opt for these plans to accomplish their goals. Selecting the right savings plan can help you grow your finances significantly over time.
Key Takeaways
Savings plans are insurance policies that assist in saving for long-term and short-term objectives, in addition to providing life insurance.
Selecting a suitable savings plan is based on your investment time horizon, risk tolerance, goals, flexibility, and fees involved.
Savings schemes provide the facility of periodic payments, tax relief under Section 80C, and financial security for your family if you are no more.
Early saving forms good habits and creates a strong foundation for accumulating riches in the long run.
What is a Savings Plan?
A savings plan is generally a kind of life insurance scheme in which the person can gather and save funds in a well-organised manner that they can use to fulfil all their short-term and long-term life goals. There are numerous features offered by these savings plans that can assist in meeting the explicit monetary requirement of a person by investing that fund as per their risk-taking capacity and suitability. This savings plan further extends the benefit of insurance coverage, along with the advantage of capital accumulation.
Apart from this, if the person who took the savings plan, unfortunately, dies during the tenure of the policy, the nominees will receive a mortality benefit under the chosen savings plan. These plans are either administered by the Government of India, financial institutions, or public sector banks. Furthermore, these savings plans are financial instruments that carry low-risk along with sound returns.
6 Essential Factors to Consider While Investing in Saving Plans
Proper financial planning is essential to deal with the contingencies and lead a stress-free life. The most dependable way to assure a financially guarded tomorrow is to begin saving regularly from a tender age. By investing your funds in a savings plan, a person can make a secure financial bubble for their future, along with receiving numerous tax advantages. However, there are some factors that you must keep in mind while opting for the best savings plan for you and your family.
Risk Capacity and Profile: To find and choose the best savings plan, you must first decide your risk-taking capacity. Personal inclinations and age are the two most important components that can determine the amount of risk that a person can bear. Usually, people who are young and in their 20s and 30s can choose investment options that hold a significant amount of risk and that offer a higher rate of return. They can opt for more competitive options like investing more money in equity or the share market than in debt markets.
For those looking for plans that involve greater risk and provide greater rewards, investing their funds in a Unit Linked Insurance Plan (ULIP) is a smart choice. On the contrary, a conventional investment or a money-back savings plan is extremely suitable for the requirements of the investors who are not willing to take a great amount of risk. These savings plans with moderate risk guarantees return to investors, but at a lower rate of return.
Investment Duration: Yet another essential factor to keep in mind while choosing the best savings policy is the duration for which the amount is invested. There are numerous savings plans that provide investors with a long-term to medium-term investment horizon and further work as tax-saving investment alternatives. Some of them can assist you in increasing your funds in the course of your policy.
You can start your investments with a small amount and then build your corpus over time. Investing a small amount in savings plans is possible as most financial institutions understand that the earnings and savings of the person keep on fluctuating depending upon the age of the person, and hence, offer them the alternative when they can enhance or diminish the amount to be invested.
Ultimate Goals: Before choosing the most suitable savings plan, you must be clear about the purpose of choosing the plan. When you know your ultimate goal, you can easily determine alternatives for tax-saving investments. These goals can vary from creating a corpus for your retirement or holding adequate funds for your child's higher education, or their wedding, to maybe constructing a home.
Savings Plan Highlights: Different savings plans hold distinct highlights. The most suitable and tax-saving investment plans enable you to withdraw a partial amount after some time by giving up on a certain portion of the policy while retaining the other half with added benefits. On the other hand, some savings plans hold a fixed tenure that ranges from 5 to 10 years or maybe 30 to 35 years.
With flexible alternatives and extensive coverage, you can choose the best savings scheme that can provide you with protection along with savings. Hence, it becomes important to look at all the highlights and features of a savings plan before making a selection.
Flexibility of a Savings Plan: For fulfilment of all your long-term goals, you must choose a savings plan that is flexible. Doing so enables you to take care of your unforeseen short-term requirements. They further extend the flexibility of abdicating the policy if the circumstance requires you to do so.
Prices of the Savings Plans: Another and most important fact that you must keep in mind while opting for a savings plan is its price. You must accurately comprehend the charges and prices associated when picking the best savings plan for you.
The most suitable savings plans hold minimal charges and render flexibility in terms of fund withdrawal, the term of the plan, and the receipt of interest. Furthermore, the long-term impact of these prices is much less, making it a transcendent approach to enhance wealth at a moderate price.
Advantages of Choosing Saving Plans
Saving plans are the most favoured investment alternative for people who wish to invest their hard-earned money in risk-free options that are future-centred. Aside from this, there are several advantages of a savings plan that are mentioned below:
Financial Coverage and Regular Payouts: As savings plans are schemes that fall under the scope of life insurance, they render much-needed financial coverage to your family and your loved ones in case of your unfortunate demise. Apart from the financial coverage, these savings plans also provide you with regular payouts that can further assist in protecting your family and loved ones financially in a more comprehensive manner.
Boosts Financial Routine: Another importance of savings plans is that with these, you become more aware of your financial routine, as these savings plans inculcate regular saving habits in you. With the help of these savings plans, you can regularly invest and accumulate funds that will further aid in securing your future, making them a great teacher in terms of financial discipline and investment.
Increases Flexibility: The life goals and priorities of every person are different and unique. Saving plans are designed to take into consideration all life goals and different requirements that people hold. A savings plan can be tailored as per your needs and requirements, and apart from this, they also hold different beneficial features. They offer alternatives in funds and additional investment criteria, along with the alternatives in payouts and the payment term. Furthermore, a person can turn around with their selection of investments as and when the risk capacity and capital requirement change.
Renders Tax Benefits: As saving plans are basically life insurance plans, they extend similar tax advantages that are administered by other insurance plans. A person can receive tax advantage under Section 80C of the Income Tax Act, 1961 and receive a tax exemption on premium for an amount up to ₹1.5 lakhs.
Did You Know?
The discount rate for calculating SSV can be up to 50 basis points higher than the 10-year G-Sec yield.
Source - Business Standards
Conclusion
Savings plans are regarded as one of the most suitable investment plans in India. It is essential for you to examine and analyse your requirements and goals before choosing a savings plan. You must also contemplate your risk-taking capacity before finalising your investment option. You should consider all the features and specifications of the policy and then choose the best savings plan that best suits your requirements.
Early savings help you a great deal because of the power of compounding, better returns, and ample time for you to realise your goals without pressure. At Canara HSBC Life Insurance, we recognise that every individual has their own goals and responsibilities. Our savings plans are designed to suit your requirements, offering flexibility, security, and growth towards securing a better future.
It is never too late to invest your money in a savings plan. All you need is a profitable and secure savings plan.
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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