Saving plans can help you save money and fulfil various financial goals in life. The kind of savings plan you should use will depend on your risk appetite, financial goal and time. So, the question is not really about who should invest in a savings plan, but when.
Anyone with an income and a financial goal can use a savings plan to invest and grow their money. For this, you need to understand different types of savings plans and how they work to fulfil your various life goals.
Four Different Types of Saving Plans
As per your preferences and saving needs of your future, you can invest in a variety of savings plans, mentioned below:
1. Endowment Plans
a) Safe investment with minimum guaranteed returnsb) Bonus additions benefit long-term investorsc) Life cover and goal protection options make it ideal for fulfilling the family’s important financial goals
2. Money Back Plans
a) Also safe investments with guaranteed returnsb) Bonus additions are payable at maturityc) Good for maintaining a cash flow
3. Unit Linked Insurance Plans (ULIPs)
a) Multiple asset class investment optionb) Invest as per your risk appetitec) Automatic portfolio management ensures your portfolio stays active even when you are not watchingd) Goal protection option availablee) Bonus additions for long-term investors
4. Retirement or Pension Plans
a) Long-term safe investment plansb) Primarily concerned with generating long-term stable cash flowc) Bonus additions may be availabled) Life cover option available
When to Buy a Savings Plan?
You should select a savings plan as per your financial goal, safety need and risk appetite. Here’s a list of situations and which savings plan would be better for investments:
Long Term Goals of your Family
If you have got married and you’re the head of your family, you need to fulfil your family goals. Here are some of the long-term goals for which you need to invest in savings plans:
- Child’s higher education and marriage goals
- Home renovation or interior rework
- Retirement fund for spouse
- Family vacation goal
These are few goals where you would want a specific sum at the time of the need and would want to avoid investment risk. Thus, the following options best suit your needs:
a. Endowment planb. Money back planc. ULIP with debt fund investment
All these plans offer safe returns and an investment tenure of 10 to 20 years. Additionally, the goal protection feature will ensure that the goal is met even after your untimely demise.
What is Goal Protection Feature?
You can make your savings plan more effective by adding the premium protection feature to it. This feature ensures that your policy continues even after your demise so that your family receives the funds for their future goals.
In case of the untimely demise of the policyholder, the insurance company pays the remaining premiums. Your family will also receive the base sum assured at the time of demise.
After your professional life is over, you seek a stress-free retirement and a comfortable life. At this stage, you need complete financial independence. For this one financial goal you will need:
1. A large corpus adequate to take care of your post-retirement financial needs
2. A safe investment to provide a lifelong pension
3. Leaving a legacy for the next generation
The retirement goal is a mix of three fundamental stages of investment – accumulation, preservation and distribution. Thus, you need savings plans which can assist you in the three stages:
- Multiple asset allocation allows for higher long-term growth
- Automatic portfolio management gives you the advantage of market movements
- Best for wealth building for your retirement
- Century option (Invest 4G) allows you to continue with the plan till the age of 99
- A systematic withdrawal plan gives the option to draw an automatic pension after retirement
- Pension from this saving plan is exempt from tax if your annual investment has been:Lower than 10% of the sum assured of the planBelow Rs 2.5 lakhs for plans started on or after 1st Feb 2021
- Safe investment plans
- You can invest in a lump sum and defer the pension release as per your need
- The joint holding option lets your spouse receive the pension after you without hassles
Life cover in both savings plans allows you to leave a legacy for the next generation after your demise.
Wealth Maximization with Savings Plan
If you are looking to build wealth apart from your regular financial goals, savings plans like Invest 4G can help you do so. ULIP are the best saving plan when you want to build wealth passively.
Invest 4G is an online ULIP from Canara HSBC Oriental Bank of Commerce Life. This plan has features that enable you to invest aggressively and take advantage of market movements:
1. Automated portfolio management ensures your portfolio retains its balance over time regardless of market performance.
2. Bonus additions give a boost to your corpus if you stay invested for longer periods.
3. Automated safety measures systematically allocate your equity fund corpus to debt near maturity.
4. Low expense ratio and return of mortality charges mean maximum growth to your portfolio.
Thus, choose a saving plan according to your financial need, risk appetite and investment horizon to achieve specific financial goals. The age of entry for most saving plans is 18 years plus. So, you can start investing as soon as you start earning.