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Guaranteed Savings Plan for Young Professionals

dateKnowledge Centre Team dateJanuary 12, 2021 views178 Views
Guaranteed Savings Plan for Young Professionals

The perfect time for investments and savings is when you start earning. It is the beginning of your life, and though you do not find many responsibilities on your shoulder at the moment, further in life you will require money for a thousand different reasons. Hence, it is extremely significant to save whenever you get a chance. The days when you saved little pennies in your piggy bank are long gone. These are the times of smart decisions and sturdy future planning.

The best way to save is by investing in a savings plan or a life insurance plan. They are the safest ways of saving for your future or unseen occurrences. However, most of us are not aware of the benefits of a savings plan due to which only 2.74 % of the population in India invests in savings plans.

First, let's look at the definition and functioning of a guaranteed savings plan. A savings plan is a life insurance plan which offers individuals an opportunity to accumulate funds for future purposes. Such investment plans guide individuals and help them invest in a disciplined manner for their short-term and long-term financial needs.

The individual has to invest depending upon his/her abilities and risk-bearing attitude. Also, guaranteed savings plans give you an advantage of insurance with wealth accumulation. The insurance advantage is that a death benefit is paid to the policy’s beneficiary in case of the insured’s sudden demise during the policy tenure.

Factors to Consider While Choosing a Savings Plan

While choosing the perfect savings plan as per your requirements, one should keep in mind the following factors:

  • Goals: You should keep in mind the objective behind investing in a savings plan and choose the plan which gives you the best benefits.
  • Risk Appetite: Make sure that you know the amount of risk you can bear. You will have to maintain a balance between risk and reward.
  • Liquidity: You need to make sure that your savings plan has enough liquidity and will provide you funds in emergency times.
  • Tax Deduction: It is essential to consider the tax benefit offered by the investment product. Investing in such products will reduce your tax amount and protect you in case of a medical emergency.
  • Diversity in Investment Product: Consider all the investment options, which serve your purpose and diversify the investments. This helps in reducing the risk associated with a savings plan.
  • Keep a Check on the Portfolio of the Plan: Ensure to keep a check on the portfolio investments and returns at the end of the year and see if you can make any changes in your investment.
  • Charges of Savings Plan: It is essential to know about your saving plan’s costs and charges. The best kind of savings plan is the one that has minimum charges and flexible withdrawals.
  • Features of the Plan: Look for different benefits and incentives a savings plan offers. Choose the plan which has flexible options and will help you grow in life.

Best Savings Plan to Invest In India

There are different types of guaranteed savings plans all around India. There are Government schemes as well as bank policies. It all depends upon the investor’s requirements and goals. A list of best savings plan is given below:

Best savings plan amongst Government banks in India

There are many Government banks that offer various types of savings plan, with different maturity age and interest rate. All of these banks provide tax and other benefits. The banks which offer the most beneficial savings plan for youth professionals are mentioned below:

Best Bank Saving Plans in India

You don’t have to enroll in a particular saving policy. You can also invest in a particular type of deposit, which are investment products, where you can carry out your saving procedures. The different types of deposits are:

Canara HSBC Smart Vriddhi Plan Guaranteed Saving Plan 18yrs-75yrs 60 years

Fixed Deposit: Over the years, fixed deposit is the most common and trusted way of saving amongst the Indians. You get an interest rate of 5.5%-7.5% with guaranteed returns. Fixed deposits are bank-based investment products and are closely monitored by RBI Bank, thus ensuring safety. Investors can avail of a loan against their FD investments at lower interest rates. The interest rate for an FD investment is fixed at the time of opening the account but it can fluctuate throughout the year.

Recurring Deposit: A recurring deposit is a term deposit which a bank offers. In this type of savings plan, investors deposit money regularly and earn high returns upon maturity. The interest rate is between 4.5%-6.5%, with guaranteed returns. The minimum investment is Rs 500 and the maximum investment can be up to Rs. 1 lakh. Recurring Deposits offer higher interest rates to senior citizens.

Best Government Saving Schemes in India

Government schemes are considered the most trustworthy amongst other plans, based on returns, popularity, and security. These schemes offer reliability, security, and dependability, therefore the popularity. The various Government schemes are:

  • National Savings Certificate

    It is a fixed income investment plan, which can be opened with any post office. You get tax exemption benefits along with wealth accumulation. The National Savings Certificate is perfect for mid-income investors, as there is low risk.

  • National Savings Scheme

    The Government supports the National Savings Scheme, and in this scheme, the total assured amount is paid after the completion of its maturity tenure. Furthermore, the applicable interest rate is compounded annually. Along with saving funds, you get the benefit of tax exemption.

  • Public Provident Funds

    Public Provident Funds (PPF) is an initiative of the National Saving Organization, offering a term period of 15 years. It is one of the safest options of investment, with a fixed interest rate of 7.79%. The interest and the maximum limit of funds i.e. 1.5 lakhs, both are tax exempted. Another advantage of PPF is that it is quite flexible and can be transferred from any bank or post office to another bank and post office. The minimum contribution allowed is Rs. 500 and the maximum is rs. 1.5 lakhs. It is the most selected savings plan.

  • Post Office Saving Scheme

    If you are someone with a low-risk appetite, this is the guaranteed saving plan for you. It is the most relied on and secure saving plan, with the benefit of high-returns. The post office saving scheme is easily accessible and completely hassle-free. A POSS Account can be opened in the name of a minor. It has an interest rate of 4%.

  • Employee Provident Fund

    The Employee Provident Fund was introduced by the Employee Provident Fund Organization, especially for salaried individuals. It is the perfect type of savings plan for youth, who have currently embarked on the journey of earning money in the corporate sector. In this, the salaried individuals have to invest funds in the Provident Fund account. The EPF enables individuals to save for their retirement and life after retirement. The financial contributions are made from the salary of the employee. The contribution is 12% of the salary, and the employer contributes a similar amount. The annual interest rate ranges between 8%-12%.

  • Equity Linked Savings Scheme

    The Equity Linked Savings Scheme is based on saving and creating wealth by investing in stocks and equities. They are diversified equity mutual funds that invest across market capitalization and sectors. They have a lock-in period of 3 years. Returns are market-linked and the scheme is tax exempted.

Best Saving Plans in Insurance Sector

Endowment Plans

The most popular savings plan in the insurance sector is the Endowment Plan. Endowment Plans are regular savings plans to build an entity and give guaranteed maturity with exceptional benefits. Furthermore, they cover the insurance risk with additional riders to have a reliable source of funds when something goes wrong. The returns in this plan are similar to fixed yield and deposits.

Compare to Choose Better

There are too many options to choose from in India when it comes to selecting a savings plan.The only thing you can do is compare these savings plans online and choose the one which suits you the best. There is software such as investment calculators on which you can calculate your priorities and choose accordingly.

Guaranteed Savings Plans are essential for a better future in this era of extravagance and expensive living standards. They give guaranteed returns with great benefits. Savings bring stability to your life and help you enhance the way you live. You only live once, so why not save and live a peaceful, fun, and lavish life!

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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