Saving money is an essential task to fulfill your desires. While some may be blessed with a good enough monthly salary to cover their expenses and dreams, many have to cut down their wishes after barely covering the monthly expenses.
You should start saving every month from your salary. This may seem insignificant at first, but you will know the value in the long run. However, to increase the output to a significant amount in less time, you should be aware of the best investment plan to start in the first place.
What is a monthly income scheme?
A monthly income scheme, as the name itself suggests, is a type of mutual fund investment plan. It invests in equity funds to save capital and generate a significant amount of money. This is best for the people who need a steady income after retiring. This way, they will get a fixed amount each month after the money is accumulated for a few years.
There are several different monthly income schemes offered by mutual fund companies and life insurance companies. For instance, at Canara HSBC Oriental Bank Of Commerce Life Insurance, you will get the best monthly income scheme to get started with your monthly savings. For guaranteed monthly income and to generate a decent amount of cash at regular intervals after the maturity of the plan, investment in a monthly income scheme might be a better option after retirement for most people.
Monthly income schemes are offered by both mutual fund companies and life insurance companies. However, schemes offered by the life insurance companies are much better than the schemes offered by the former because of the additional insurance cover in some options and a maturity benefit payment after the term of the plan.
What are the different features of monthly income schemes?
There are different monthly income schemes present in the market. Each is different from the other in terms of maturity age, investment limit, policy premium term, the sum assured, and so on. While you can get honest advice from your financial advisor whenever you require, you can distinguish and see for yourself which is the best scheme for you if you know these terms.
After the maturity of the scheme, the sum assured or the total amount is broken into two categories, the monthly payment and the lump sum amount, which are given to the investor after the term of the scheme comes to an end.
The monthly income can be generated during the term of the scheme or when the term ends. The maturity benefit payment is given with the lump sum amount, that is, an assured sum, at the end of the term of the scheme with the bonus amount if said so by the respective company.
Things to remember if opting for monthly income schemes
- Always mention nominees if investing your hard-earned money in an investment. This will ensure that you or your nominees (in case you are not around) would get the lump sum amount after the term of the scheme ends.
- Look for how much return you are getting if investing a particular amount and what is the term of the scheme.
- Compare the interests and the bonus amount with other schemes with similar tenure and investment limit to choose the best for yourself.
9 Smart ways to save money every month
Apart from monthly income schemes, there are several other ways to invest your hard-earned money to secure your future. Here are some of the best investment plans in India to ensure high returns without the risk of losing your money.
1. Direct equity
There is no guaranteed return on investing in stocks. This is a risky way, and not everyone can handle it properly. As an investor, you should be very careful in choosing the right stock and managing your entry and exit. The advantage of direct equity relies on longer periods of investments. If investing in equity, you should be prepared for risks and losses and know the other procedures to cut down your losses when presented with the right opportunity.
2. Debt mutual funds
This is popular for its constant returns. People who are unwilling to invest due to risks can select this option for themselves. These funds invest in corporate bonds, treasury bills, government securities, markets, commercial paper, etc. However, interest rate risks and credit risks are present in debt mutual funds.
3. Equity mutual funds
Equity mutual funds plans invest at least 65% of the total assets in equity-related instruments. These schemes are differentiated according to the market capitalization or the sectors they invest in. In an actively traded fund, return relies upon the ability of the manager to generate returns. A person should be aware of the high risks present in investing in equity.
4. National Pension System (NPS)
This scheme is best for people looking for better returns after retirement. This scheme and all its procedures are managed by the Pension Fund Regulatory and Development Authority (PFRDA). This long term retirement plan requires RS.1000 of minimum annual contribution for NPS Tier -1 accounts to remain active.
If a person is looking for a systematic saving scheme to save while they earn, then he/she can opt for this. You can ensure regular income after your retirement by investing in this scheme. The best advantage of NPS is the low investment cost. Therefore, anyone can opt to invest in this plan.
5. Bank fixed deposit
This is one of the safest investments that most people choose over equity or mutual funds. The returns are guaranteed with good interest over specific periods. There are several options present, and you can choose the ones which will suit you the best in the coming years. The interest given upon the principal amount is taxable, but the person can spread the investment over monthly income and bank FDs to ensure the lowest tax liability.
6. Public provident fund (PPF)
For tax-free returns, you can turn to the Public Provident fund (PPF). The tax-free interest is considered the best advantage along with the long fixed periods. Getting returns that are not taxable is the best feature of an investment.
If you're investing your money in the hope of saving and getting good returns, then PPF might be the best option for you. PPF is also safer than most of the other investments, as decreed by the sovereign. The zero risk feature and no tax liability make it the best savings plan for most people.
7. Senior Citizen's Saving Scheme (SCSS)
As the name itself suggests, this scheme is available only to the senior citizens of India. Those above the age of 60 can invest in this scheme. You can apply for this scheme from a post office or a bank to avail its benefits. SCSS has a fixed term of 5 years that will be extended by three years after the scheme matures. The maximum investment limit is 15 lakhs. The interest rate that is paid quarterly is taxable. The interest rate will remain constant once the investment is made till the scheme matures.
8. Pradhan Mantri Vaya Vandan Yojana (PMVVY)
This is again applicable for the people who are aged above 60 years. The interest rate of this scheme is 7.4 percent per annum with a fixed term of 10 years. This is a great scheme to get a fixed monthly income after retirement. A person can choose to get the returns monthly, quarterly, half-yearly, or yearly.
The minimum and maximum amount that a person can get each month are Rs. 1000 and Rs. 9,250 respectively. The upper investment limit in this scheme is 15 lakhs. When the scheme matures, the investment amount is returned to the investor.
9. Real estate
Buying properties is a great way of securing funds and investing your money. There are no risks, only better returns. It is probably the most popular among the people who can afford it. Several factors play an important role in determining the value of your property, including the location and resources surrounding the property.
You can sell it at a good price or rent and ensure a steady monthly income as well. There are no fixed terms in real estate investment. You can sell it or rent it to generate a significant amount of cash at your leisure or when you need it the most.
Saving up as you earn is essential to build a financial safety net for you and your family when you no longer are earning. By investing a part of your earnings into some of the best investment plans can be a great use of money. Not only will it build a great future but also make you financially disciplined and help you meet your life goals.