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Best Saving Plans For Middle Class Population

dateKnowledge Centre Team dateJanuary 27, 2021 views138 Views
Best Saving Plans For Middle Class Population

India, with a population of over 135 crores, has a middle-class population of around 35 crores. No wonder they have to bear most of the tax and related financial burdens along with other responsibilities. To be relieved from this stress and provide a support system for your financial health, you have to have multiple income sources. Investment is one such option that can overcome the issue.

Factors to be Considered Before Investing in a Savings Plan

Before investing anywhere, one needs to consider some factors that may help choose the best and most beneficial saving plans most suited for their family's needs.

  • Financial Literacy - It is certain that there are a lot of scammers always ready to cheat you and steal money. Thus, one should possess sufficient knowledge to make prudent decisions to manage one's financial matters. Being financially literate means having these understandings-

    1. High priority for savings.

    2. Knowledge of various financial instruments.

    3. Knowledge of how the economy works.

    4. Disciplined investing, into diversified asset allocation.

  • Investment Time Horizon - It is the period for which an investor wishes to withhold the investment without liquifying for cash. One should have proper knowledge on what amount would be most profitable in the future.
  • Risk- Return Analysis - No investment is profitable if it doesn't provide returns. The investment must be made with due diligence and after proper analysis of various schemes and saving plans.
  • Wealth Goals - Investments are mostly made to achieve wealth goals that may not be possibly achieved by spending a month's salary for a middle class individual. Choose your wealth goals and then look for the most suitable saving plans worth your investment.
  • Investing Strategy - Investment strategy is the guide to invest. There are some pre-written protocols, and a set of behavioural traits an investor must possess to become a successful investor. Understand those rules and follow the strategies properly before deciding on investing.

Best Investment Plans for Middle-Class Population

Here is the list of the top best saving plans for the Indian Middle-Class population.

S. No. Investment Asset Return (Expected) Risk (Expected) Time Horizon Tax Implications
1 Direct Equity Investment Relative High Risk Relative Exempt up to Rs. 1 lakh; Excess of which is taxable at 10%
2 Public Provident Fund (PPF) 7.90% No Risk 15 years Deductions up to Rs. 1.5 lakh u/s 80C; Fully exempt from tax
3 National Pension Scheme (NPS) 10%-12% Low to Moderate 18-65 years Deductions up to Rs. 1.5 lakh u/s 80C; Additional Deduction Rs. 50k u/s 80 CCD(1B)
4 Senior Citizens Saving Scheme (SCSS) 7.5%-8.5% No Risk 5 years Deductions up to Rs. 1.5 lakh u/s 80C; Interest is fully taxable
5 Mutual Fund Investing Relative Moderate Risk Relative Deductions up to Rs. 1.5 lakh u/s 80C (Under ELSS funds). Qualifies Capital Gains Tax.
6 Sovereign GOld Bond (SGB) 2.5% (+) Relative. Low Risk 8 Years Only Interest is taxable
7 Index Investing Relative Moderate Risk Relative Qualifies capital gains tax
8 ETF Investing Relative Moderate Risk Relative Qualifies capital gains tax
9 Fixed Deposit Schemes 6%-7% No Risk 7 Days Deductions up to Rs. 1.5 lakh u/s 80C.
10 Government Securities 6%-8% Low Risk 5 - 40 Years Deductions up to Rs. 1.5 lakh u/s 80C.
11 Unit Linked Insurance Plan (ULIP) Relative Moderate Risk 5 Years Deductions up to Rs. 1.5 lakh u/s 80C; Furthermore the returns are exempt u/s 10(10D)
12 Pradhan Mantri Vaya Vandana Yojana (PMVVY) 8% Low Risk Relative Not eligible for deductions. Taxable based on slab rates.
13 Hybrid Funds Relative Moderate Risk Relative Deductions up to Rs. 1.5 lakh u/s 80C. Qualifies Capital Gains Tax.
14 RBI Bonds 7.15% Low Risk 7 Years Qualifies Capital Gains Tax; Interest on bonds is fully taxable.
15 Real Estate Investing Relative Moderate Risk Relative Qualifies capital gains tax
16 Post Office Monthly Income Scheme (POMIS) 6.5%-7% Low Risk 5 Years Not eligible for deduction. Taxable based on slab rates.
17 Bullion Investing Relative Moderate Risk Relative Qualifies capital gains tax
18 Savings Account 3%-4% No Risk Relative Deductions up to Rs. 10,000 u/s 80TTA. Taxable based on slab rates.
19 Recurring Deposit Account 6%-7% No RIsk 6 Months Deductions up to Rs. 10,000 lakh u/s 80TTA. Taxable based on slab rates.
20 Crypto Investment Relative High Risk Relative May not be treated under Capital Gain. But, it is taxable.

It's important to note that the above list is non-exhaustive; the rates and returns are not perpetual and may change over time.

Equity Investment- Under this investment, a certain number of company shares are bought, entitling the owner to be compensated according to his ownership percentage. An individual or company that invests money into a private or public company to become a shareholder is an equity investment. It gives returns year after year if invested with care and knowledge.

Public Provident Fund- It is a no-risk investment and a most popular long-term saving-cum-investment. India's government guarantees investment in the fund and the interest rates are set by the government quarterly.

National Pension Scheme (NPS)- An investment cum pension scheme for all the employees from the public sector, private sector, and even the unorganized sector except for those who work in the armed forces. It is a saving, pension, and investment scheme, all under one basket.

Senior Citizen Savings Scheme (SCSS)- SCSS is an investment cum pension scheme for Indian residents aged over 60 years, i.e. senior citizens. The scheme can provide better returns with optimum savings.

Mutual Fund Investing- An investment where a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. It is subject to market risk, and the returns generated are purely based on market conditions and asset allocation.

Sovereign Gold Bond (SGB)- The government security issued by the Reserved Bank of India (RBI) denominated in terms of gold on a per gram basis. It is not very flexible and is traded on the gold price. However, it is more favourable than an actual gold purchase.

Index Investing is one of the best passive investing strategies that attempt to generate returns similar to a broad market index. It has to be approached as in SIP.

ETF Investing- ETF or Exchange Trading Fund involves different types of investments pooled together into a single entity.

Fixed Deposit Schemes- It is one of the most effective ways to grow savings with utmost safety, the returns are assured and remain unaffected by market fluctuations. FDs can be easily renewed and offer the highest stability.

Government Securities- It is a better form of the fixed deposit that offers better return rates to the investors. You receive full repayment of invested principal at the maturity of the security. These are government debt issuances used to fund daily operations, and special infrastructure and military operations.

Unit Linked Insurance Plan (ULIP)- Under ULIP policyholders make a regular premium payment, part of which is utilized for insurance coverage. Simultaneously, the remaining portions are pooled with assets from other policyholders; these are then invested in equity and debt instruments, similar to mutual funds.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)- A pension scheme available for senior citizens. You get an annual interest on your investment, and the subscriber will get an assured pension based on a guaranteed return rate.

Hybrid Funds- It is a classification of mutual funds or ETFs that invest in different assets or classes to produce a diversified portfolio. They may be defined as asset allocation funds. The investor can invest in multiple asset classes through a single fund.

RBI Bonds- It offers a stable and more competitive rate of return than bank savings accounts. Income earned is non-cumulative, and the interest earned is directly transferred into the savings account.

Real Estate Investing- Real estate investing is becoming more popular. An investor can become a landlord of a rental property and enjoy the returns either in rent money or other forms.

Post Office Monthly Income Scheme (POMIS)- Under this scheme, the investor invests a certain amount and earns a fixed interest every month. It is highly reliable, and a low-risk MIS and generates a steady income.

Bullion Investing- Investment is made in precious metals.

Savings Account- It is a simple saving withdrawal account with regulated access. It depends on how often you make a transaction, but it also offers exceptional flexibility that's ideal for building an emergency fund.

Recurring Deposit Account- RD account is a kind of term deposit available with banks. A fixed amount is deposited by the people having regular income monthly into an RD account. It is one of the safest investment options.

Crypto Investment- Cryptocurrencies are digital assets; it is a high-risk investment but provides higher returns than any other asset class for the past decade. You need to invest at the right time for a good return in the future.

Saving plans are a good source for accumulating wealth to have a sustainable life during retirement and compensate for the important needs of life. These plans are further used for wealth creation which is the major goal of investing. Investing at the right time and choosing the right saving plans provide a sense of relief and satisfaction and help in living a life free of financial misfortune.

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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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