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How To Choose A Long-Term Saving Plan?

dateKnowledge Centre Team dateFebruary 24, 2021 views231 Views
How To Choose A Long-Term Saving Plan?

Want to save money for a future goal? A long-term savings plan is your savior. It is never too late to save some money, which would help you in unforeseen circumstances in the future. A long-term savings plan is a type of investment where you save your money you do not plan to spend at the moment. Indians have a relatively high savings rate, around 19.68% of GDP, according to national statistics.

As easy as it sounds, saving is not a piece of cake. Gone are the times when putting a 1 rupee coin in a piggy bank was all you had to worry about. A long-term savings plan requires a lot of contemplation to choose a plan which suits your plans and financial conditions the best. Keeping in mind the current conditions, it is important to choose the perfect online savings plan for your family.

7 points to consider while choosing a long-term saving plan

  • Future goals

    Your goals are the pushing factor, which is urging you to invest in money-saving plans. Make a list of all the long-term and short-term financial goals and then, choose a plan which suits your future goals perfectly. For, e.g., if you are saving up for a brand new car, a savings plan with guaranteed returns will be perfect for you. On the other hand, if you are saving for a long-term goal, you will require a plan which will guarantee you the fulfillment of the goal.

  • Available on online platforms

    You will need to check whether the plan you are choosing is available online or not. With its online availability, you also need to check if there are options for online investment, management, and withdrawal. In online savings plans, there are options for auto-debit, which are beneficial for salaried individuals.

  • Aspect of liquidity

    Before choosing among long-term online saving plans, consider your liquidity requirement. The savings plan you choose should provide you with adequate liquidity to satisfy your long-term needs. You should be able to withdraw money from the funds in a time of emergency.

  • Tax exemption

    Make sure to consider plans which provide tax benefits like tax exemption and tax-free maturity value. Tax liabilities can cut-off a part of your return, leaving you with deducted money. Investing in long-term savings plans that enable tax exemption not only saves your tax money but also protects you in times of emergency. Under section 80C of the Income Tax Act, a maximum of Rs. 1.5 lakh can be claimed for tax exemption.

  • Risk & reward factor

    One of the most important factors in a savings & investment plan is the risk and reward factor. Every individual differs in terms of risk appetite, and it is essential to select the best savings plan in India for you, according to your risk appetite. The balance between the rewards and the risk in the plan has to be favorable.

    If you are hunting for a long-term online saving plan, you need to choose a savings plan which gives you guaranteed returns with low levels of risk, just like Canara HSBC Oriental Bank of Commerce Life Insurance's Guaranteed Savings Plan. This plan not only gives you the benefit of guaranteed returns of the intended maturity value but extra loyalty bonuses for investing in the plan for a long period.

  • Reviewing the plan and updating investment portfolio

    The performance of the plan is also a significant feature to examine. Your investment portfolio should be reviewed at least once a year to make necessary changes and locate areas where you can try to get more returns. Also, while reviewing the plan, see if you can diversify and invest in more than one investment product. Diversifying reduces the risk associated with each plan.

  • Flexible terms & conditions

    With investment in a savings plan, terms and conditions are bound to be applied. However, luckily, some savings plans have flexible and compatible terms and conditions. In the flexibility factor, you will have to look for flexibility in investment mode and investment period. Try to find a plan which gives you options in both categories.

    The Online Invest 4G savings plan by Canara HSBC Oriental Bank of Commerce Life Insurance offers all kinds of investment modes. With life cover and wealth boosters, it is one of the best savings plans in India. It is a package of great returns with flexible switch options.

Types of long-term savings plan

Now that you are well-versed with the conditions you have to keep in mind to choose a savings plan, here are the most popular types of long-term saving options, which people in India invest in:

  • Unit Link Insurance Plans (ULIP’s)

    In a ULIP saving plan, the individual gets the benefit of both investment and insurance. You have to pay a premium monthly or annually. A part of this premium is used to cover your costs of insurance, and the other part is used as an investment to the fund of your liking. You get the best of both worlds and a secure long-term plan. There are options for equity, hybrid, and debt funds.

    For example, the Titanium Plus Plan of Canara HSBC Oriental Bank of Commerce Life Insurance is a great example of a ULIP, with the flexibility of premium payment and a safety net of life insurance.

  • Public Provident Funds (PPF) -

    If you are looking for a plan with constant interest at the lowest risks, this is the plan for you. PPF offers tax exemption, making it more considerable. The tenure for a PPF is 15 years and can be extended for five more years.

    You can withdraw funds after five years from the beginning of the plan. It is a post office savings scheme. There is flexibility in this plan in terms of the investment amount. With a small investment, you can acquire great returns in a PPF.

  • National Pension Schemes (NPS) -

    This scheme is a public scheme backed by the Government of India. Individuals between the age of 18-60 can invest in this scheme. The age limit has been extended to a maximum age of 70 years. Through this scheme., you can invest in equities, debts, and other such instruments.

    The final pension you acquire is your return on the investment. In cases of emergencies, this scheme gives you the liberty of withdrawing a partial amount of funds.

  • Equity Linked Savings Scheme (ELSS) -

    ELSS is one of the best mutual funds as it becomes eligible for tax exemption when the investments are under 1.5 lakhs. It is the only scheme that gives you the incentive of tax exemption and guarantees you high returns in the future.

    The only drawback of ELSS is that it entails higher risks than other schemes. Every deposit in a particular account has to follow a strict lock-in period of 36 months, and thus, it is not possible for you to withdraw funds from the account under any circumstances. You will have to wait for the lock-in period to cease.

  • Guaranteed Savings Scheme -

    A guaranteed savings scheme is a safer alternative to ULIP, as it contains less risk with guaranteed returns. You can also claim tax benefits like tax exemption in this scheme. It provides life cover for the entire term, but you pay the premium only for a limited period. You can choose the payment term according to your payment capacity and horizon.

Scheme Duration Rate of Interest* Amount Contributable Taxability of the Returns
ULIP 5 years (minimum) - 20 years (maximum) It is not fixed. Depends upon the ULIP fund performance Minimum- Rs. 2500

Maximum- None
Not taxable
PPF 15 years 7.1% p.a. Minimum- Rs.500 per annum

Maximum- Rs.1.5 lakh
Interest income is tax-exempt.
NPS Until the age of 60 years 5% p.a.to 8% p.a. Minimum- Rs.1,000 per annum

Maximum- No limit
Upon retirement, 60% of the corpus is tax-free. Annuity pension received on balance 40% is taxed at slab rates.
ELSS 3 years Not fixed. Minimum- Rs.100 per annum

Maximum- No limit
Long-term capital gains taxed at 10% + dividends from ELSS is taxed at 10%
Guaranteed Savings Scheme Until the age of 60 NA Minimum- Rs. 1800

Maximum- None
Taxable under section 80C of Income Tax Act.

Table 1. Comparison between different schemes

Saving is the smartest decision one can take in their life. It helps you in all kinds of emergencies and plays a major role in fulfilling your future financial goals. A long-term savings plan increases your annual income, generates income on idle cash, gives you life coverage and other such incentives.

While choosing an online savings plan, it is recommended to compare different plans, be thorough with all the terms and conditions, and then invest. There are a lot of options in the market for money savings plans. However, the tough nut is to choose the right one!

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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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