The definition of Saving has evolved over the years from “putting aside” some money to “investing” the money so that it works hard and grows over time. The objective of saving has also changed because the fast-growing, increasingly educated Indian society is more aspirational than ever. It is natural to dream of a periodic vacation, offer the best possible education to children and lead a comfortable life before and after retirement.
When you have a family, you will also think of ensuring a steady income or some sizeable contingency fund to take care of your family if you are not around.
Saving Plans as an Investment Avenue
There are several investment options available across asset classes such as Gold, Real Estate, Fixed Deposits, Bonds, and so on. It is tempting to stay invested in one of them or all of them basis current market trends. However, the best savings plans, and the best saving schemes focus on financial goals and invest in assets that can match to achieve these goals.
Some of these objectives could be:
- Are withdrawals (turning to cash) possible in case of emergency?
- Does the value of asset changes very quickly and frequently (volatile)?
Movable and immovable assets such as Gold and Real Estate are highly illiquid and volatile. Selling off physical gold could be challenging, and real estate sale depends on buyer availability, market dynamics, etc.
While equity stocks could be easily turned to cash but suffer from frequent and significant changes in their value.
You may want to look at options that offer you tax benefits when you invest or withdraw the amount.
- Deduction of the invested amount
- Exemption on withdrawals
- Long-Term Capital Gains (LTCG) on maturity value or withdrawals
Learn what is long-term capital gain and how it works in India.
More tax-efficient investments will save your wealth from erosion due to taxes.
Before you start parking your hard-earned money into an investment, you should know whether the risk is worth taking. For example,
- How long can you stay invested? or How far is your goal?
- Short-term or less than 3 years investments should avoid equity exposure
- Long-term investment which are 5 years or longer must allocate to equity for a higher inflation-adjusted growth
- What are your options to manage your investment risk in market-linked investments?
Financial Support for Family
You are expected to have a large term insurance cover to protect your family from the consequences of your untimely demise. However, you also have a few very important financial goals to meet on the way. While the term insurance will take care of the survival costs of the family, you can use separate life insurance plans to protect the goals. These plans will:
- Help you build the corpus for the goal
- Protect the goal from your untimely demise
- Do it all free of taxes
Therefore, it is important to make the right investment choice and then stay invested for the defined term.
For example, Canara HSBC Oriental Bank of Commerce Life Insurance offers different insurance policies that provide life cover, guaranteed income stream, and guaranteed additions to Sum Assured. If you are exploring the best saving policy in India, you must consider these three insurances cum investment offerings:
1. Guaranteed Income4Life
Guaranteed Income4Life is a perfect investment plan if you are looking for an income stream to match a future expense. For example, if your child will turn 18 in 10 years from now and you want to pay his/her fees for a 5 Year integrated MTech program.
- You can opt for Guaranteed Income Plan with a 10-year policy term
- You will invest each year for the first 5 years
- After the fifth instalment, the policy will continue without premiums for another 5 years
- Starting the end of the 10th policy year your child will receive intended payments from the policy for the next 5 years.
- You can also opt to receive the future regular income pay-outs as a lump sum calculated as the current value of the amount.
Protect Your Goal from the Unforeseen
The policy also offers some valuable additional features under the premium protection option. Premium protection will financially secure the goal in case of your death or disability within the policy tenure. Among other things:
- The future premiums are waived off in case of untimely demise or permanent disability.
- In case of untimely demise, the family will receive the sum assured immediately
- The child will receive the fund value at the time of maturity-either in regular income streams or as a lump sum
2. Guaranteed Savings Plan
This plan is the best gift you can give to a new-born as a parent. You can start investing in the Guaranteed Savings Plan for a new-born meaning, you can start saving for the child’s future, literally from DAY 1.
If you opt for a 20-year policy term with a 10-year premium paying term for your new-born and invest Rs.1 lakh each year for 10 years, the policy can give you a lump sum return of approximately Rs.28 lakhs at the end of 20 years. (That is assuming you are 30 years of age at the beginning of the policy.)
This includes the guaranteed Sum Assured and guaranteed yearly/loyalty additions.
3. Invest 4G ULIP
Expenses can neither be predicted nor estimated. For example, if a portion of your house gets damaged due to harsh weather conditions, you may have to quickly fix the problem. In another scenario, medical emergencies may cost money that is beyond the scope and limit of your current Mediclaim insurance. Having a guaranteed income in parallel can be useful on a rainy day.
However, if you are looking for wealth creation, Invest 4G ULIP is ideal, because:
- You can invest in high growth equity funds that can give you better returns in the long run
- Manage your equity-debt portfolio automatically without even looking at the plan
- Withdraw from your corpus partially after the five-year lock-in period
- Receive bonus units for long-term investment and a high premium amount
- Protect the goal from your untimely demise
- Automatically move all your equity fund to the low-risk debt fund in the last 4 years of the policy
- Systematically withdraw your money from the policy in the final years of the policy
The right investment plans can help you create wealth, tide over temporary emergencies, and also lead a comfortable life. It is imperative that you think, explore, compare, and then stay invested in the right insurance policy that will give you great returns and above all, peace of mind!