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6 Factors to consider while opting for a savings plan

dateKnowledge Centre Team dateMarch 02, 2021 views221 Views
6 Factors to consider while opting for a savings plan

Saving is the most basic habit that a person is taught by his/her 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 saving plan.

People usually put a small part of their earnings in a savings plan regularly that 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 saving plan can help you grow your finances significantly over time.

What is basically 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 most well-organized manner that they can use for fulfilling 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 saving plan. Savings plans are either administered by the Government of India, financial institutions, or public sector banks. The principal benefit of the savings plan is that they are owned by the Indian Government and provide utmost security and protection to your invested fund. 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 secured 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 saving plan for you and your family.

1. Risk capacity and profile

To find and choose the best saving 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 saving plan is extremely suitable for the requirements of the investors who are not willing to take a great amount of risk. These saving plans with moderate risk guarantees return to investors, but at a lower rate of return.

2. Investment duration

Yet another essential factor to keep in mind while choosing the best saving policy is the duration for which the amount is invested. There are numerous saving plans that provide investors with a long to medium-term investment horizon and further works 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 saving 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.

3. Ultimate goals

Before choosing the most suitable saving plan, you must be clear about the purpose of choosing a savings 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.

4. Savings plan highlights

Different savings plans hold distinct highlights. The most suitable and tax-saving investment plans enable you to withdraw the 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 saving scheme that can provide you with protection along with savings. Hence, it becomes important to look at all the highlights and features of a saving plan before making a selection.

5. The flexibility of a savings plan

For fulfillment 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.

However, it is more suitable to hold on to the tax-saving investment savings plan for a prolonged duration to receive a better rate of return at maturity.

6. Prices of the saving 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 saving plan for you.

The most suitable savings plans hold minimal charges and render flexibility in terms of funds 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 favored investment alternative for people who wish to invest their hard-earned money in risk-free options that are future-centered. 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 required financial coverage to your family and your loved ones in case of your unfortunate demise.

    Apart from the financial coverage, these saving plans also render 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 saving 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 considerations and cater to all such 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 changes.

  • 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 Rs 1.5 lakhs.

Savings plans are regarded as one of the most suitable investment plans in India. It is essential for you to examine and analyze your requirements and goals before choosing a savings plan. You must also contemplate your risk-taking capacity before finalizing your investment option. You should consider all the features and specifications of the policy and then choose the best saving plan that matches your requirements most suitably. It is never too late to invest your money in a saving plan. All you need is a profitable and secured savings plan.

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Frequently Asked Questions

What is saving plan?

A savings plan is likely to be different for everyone depending on the financial goal, risk profile, returns, and investment horizon. If you are young and want to save for your retirement, ULIPs like Invest 4G or Titanium Plus plan would be the best option. You are likely to create a large corpus by your retirement through market-linked returns if you invest in this savings plan. If capital protection is your aim, then traditional insurance plans such as Guaranteed Money Saving Plan should be suitable for you.

Who should invest in a Savings Plan?

If you are looking for a guaranteed income plan, then saving plans should be on your list of investments that you are planning to make. Savings plan require you to invest a pre-decided amount on a regular basis. People with a regular stream of income who require a lump-sum amount after a period should opt for a savings plan. Working professionals, self-employed people and businessmen should consider a savings plan to meet their long-term financial obligations. Saving plans are also ideal for people who are risk-averse and want to accumulate funds through relatively safer mediums. These saving plans inculcate financial discipline in policyholders which make them crucial for every portfolio.

How much money should you put in savings each month?

The amount that should be invested in a savings plan each month depends on the income, existing financial obligations and the long-term financial goal. If you have a steady income, you should save at least 20% of your monthly income. It is not necessary to invest your entire money into a savings scheme as investments should be diversified. Ideally, you should aim to have a financial buffer of over 10 times of your annual income. Choose an income plan based on your financial circumstances to stay afloat.

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What is the difference between saving and investing?

Saving is the money that you keep aside for emergencies or for buying any big-ticket item. Investing means growing or multiplying the wealth that you have by buying savings plan, or any other assets. Buying a savings plan will help you in achieving your investment goals such as retirement, your child’s higher education or marriage, or for buying a new house.

Which savings plan is best for retirement?

The Invest 4G plan with its multiple investment options and various portfolio management strategies for capital protection is an ideal saving plan for retirement. Also, Guaranteed Income4Life is also another savings plan that you can consider for building your retirement corpus as it acts as a guaranteed income plan that will provide you maturity benefits to manage your post-retirement expenses.

Which savings plan is best for long-term goals?

Smart Goals Plan is a savings plan with its unique features such as modification of the sum assured partial withdrawal and fund switch can help you plan for your long-term financial goals. Canara HSBC Oriental Bank of Commerce Life Insurance offers a wide variety of saving plans that you can invest in as per your risk appetite and investment goal.

Which savings plan is suitable for girl child?

The Future Smart unit-linked plan from Canara HSBC Oriental Bank of Commerce Life Insurance is the ideal savings plan for the girl child. Monthly Income Advantage Plans are also a good option if you are planning to invest in a savings plan for your girl child.

Where should I invest my money?

You should spread your investments across financial instruments. However, having the best savings cum guaranteed income plan in your portfolio is extremely important. Savings plan ensures financial stability and also helps in fulfilling short, medium and long-term monetary goals.

What is a monthly income advantage plan?

A monthly income advantage plan ensures that you lead a stress-free life with your loved ones as it provides a life cover along with giving you guaranteed monthly income. In short, it is a life insurance and income plan that will financially secure commitments made to your loved ones. Canara HSBC Oriental Bank of Commerce Life Insurance Guaranteed Income Advantage Plan is a monthly income advantage plan that provides life cover for the entire term while you pay premium only for a limited period.

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What is a good age to start saving money?

When you plan to invest in a financial product, it always pays well to start early. The earlier you start saving and investing, the better. When you start investing early, the capital gets adequate time multiply. Even a small amount invested for a long time can give substantial returns due to compounding in a savings plan. Invest in an income plan as early as possible to build a significant corpus that will later help you in life. Ensure that you buy the best saving plan in India that can be aligned with your investment goals.

Should you use a savings plan for retirement planning?

Yes. Retirement planning is one of the most important financial decisions of our lives. The best saving plan offers a host of features that may help you build your retirement corpus. Some of the saving plans like Guaranteed Income4Life offer guaranteed returns at policy maturity. Such returns can act as a regular income stream even after your retirement to help you stay financially stable.

Are saving plans beneficial for managing unexpected expenses?

Yes. Best saving plans in India offer partial withdrawal system that can be utilized during your rainy days. Being financially prepared to tackle such odds will help you manage any unforeseen expenses in a smooth manner. Buy a monthly income advantage plan that will generate a steady source of income for you to take care of both long-term and short-term financial goals.

How to save tax by using savings plan?

Saving plans are known for helping us achieve our financial goals. Best saving plans allow you to grow your wealth while providing life cover. Saving and investment plans are also beneficial for tax planning. Premiums of savings cum protection plans come with tax benefit under Section 80C of the Income Tax Act. Moreover, proceeds received upon the death of the policyholder or upon the maturity of the policy are tax free under Section 10 10(D).

What is the right age to start saving money?

When you plan to invest in an income plan, it always pays well to start early. The earlier you start investing in a savings plan, the better. When you start investing early, the appreciation in capital is significant. Even a small amount invested in the best saving scheme for a long time can give substantial returns due to compounding. Buy the best savings plan as soon as you start earning to achieve all your milestones on time.

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How a savings plan can help in building your child’s education fund?

Saving plans help in building wealth over time against the investments that you make. Buy the best savings plan to build an education fund for your child. The best saving plan for kids offered by Canara HSBC Oriental Bank of Commerce Life Insurance eases the stress of planning your child's future by providing a lump-sum payout on the investment. Consider investing in a monthly income advantage plan to assist you in fulfilling your financial goals.

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How Savings Plans by Canara HSBC Oriental Bank of Commerce Life Insurance can help you?

Every person has a unique reason to save and invest. With ULIP savings schemes, the company caters to people seeking wealth creation through capital appreciation. Contrarily, the traditional plans can help you save for important life goals without worrying about the fluctuation in fund value. All major savings plan offers partial withdrawal facility that can help you take care of unplanned contingencies. With savings plans from Canara HSBC Oriental Bank of Commerce Life Insurance, you get adequate flexibility while investing and receiving the savings benefits, which makes them a good investment choice for investors looking for income plans.

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