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Savings & Investment Plans in India

Financial planning is very important as you may need funds at various stages of life. If you plan your journey well, you can easily take care of important events in your life. You should look for the best investment options that can grow money while you focus on other aspects of life. Online savings plans are one of the finest options to build wealth over time. However, mere planning is not enough, you need to allocate your money into various investment plans to achieve your planned goals.

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What is a Savings and Investment Plan?

What is a Savings and Investment Plan?

Saving and investment plans are financial products that provide you with an opportunity to build wealth for the future and help you meet the financial goals. Best investment plans inculcate the habit of disciplined investment and help build your corpus to achieve future financial objectives with ease.

If a financial plan is the blueprint of your financial life, investment plans are the tools to turn the blueprint into a reality. Investment plans are critical in achieving your future financial goals and look after the needs.

You can use different types of saving plans for different goals and investment objectives.

Types of Saving Plans

Before you buy any saving plan, you must do proper research and understand the risk, returns, and tax benefits.
Based on risk level, different type of saving plans are as follow:

Low-risk Savings Plans

If you are an investor with a low-risk appetite, you can choose a savings plan with low or no volatility. These savings and investment plans are reliable and give you stable growth with minimum risk involved. Most of the low-risk savings plans have a long lock-in period. Below are some of the low-risk investment plans:

a. National Pension Scheme

NPS is a government-sponsored pension scheme initially designed for government employees. Now it is available for other private and unorganized sector employees as well. You invest small amounts at regular intervals in this saving and investment scheme. At retirement, you can withdraw a per cent (up to 60 per cent) of your corpus. The remaining comes to you as a monthly pension. The scheme lets you invest in different funds like debt funds, government funds, equity, etc.

b. Senior Citizen Saving Scheme

Senior Citizen Saving Scheme is one of the best investment plans for a retired person. The scheme is designed for senior citizens and can be availed from banks or post offices by anyone over 60 years of age. The tenure of this investment plan is five years. The period can be extended up to 3 years when it gets matured.

The maximum amount you can invest in the scheme is Rs 15 lakh. The interest is paid to you quarterly, and it is taxable. The interest rate change is revised every 3 to 6 months. The rate at which you buy the policy will remain the same during the tenure of your policy, even if the rate change happens later. Senior citizens can claim tax deduction up to Rs 50,000 under section 80TTB with the earned interest from the scheme.

c. Public Provident Fund (PPF)

This is another popular investment plan for investors with a low-risk appetite. The plan comes with a lock-in of 15 years. Premature withdrawal is allowed only in case of emergencies. The interest is calculated every month and it gets added to the PPF account at the end of the financial year. The minimum investment required is Rs 500 annually, while the maximum you can invest in PPF is Rs 1.5 lakh in a financial year. The principal amount, the maturity amount, and the interest earned is exempted from tax. You can be eligible to take a loan against your Public Provident Fund account.

d. Money-Back Plan

The plan combines investment and insurance and gives you assured returns periodically. The tenure of this savings plan varies, and you have the choice to decide the term. In general, the policy term is 20 years. With a Money Back Plan, you receive a per cent of your sum assured every 5 years, and you get the balance amount along with bonuses (if any) on maturity. In case of the demise of the policyholder, the nominee receives the sum assured.

e. Sukanya Samriddhi Yojana

This is a popular child investment plan to secure the financial future of a girl child. It is a government-backed investment plan that gives your safe and guaranteed returns. The plan duration is 21 years or until the marriage of the girl child after 18 years of age. The investment you make in the scheme is eligible for a tax deduction. The interest earned and the maturity amount is exempted from taxation.

f. RBI Saving Bonds

These were introduced on 1 July 2020, and you can invest a minimum of Rs 1000 in these bonds. There is no upper limit for investment. The tenure of these bonds is seven years and offers you an interest rate of 7.15% (effective from 1 January 2021, subject to change). The interest you receive from the bonds is taxed as per your income tax slab.

g. Fixed Deposits

It is an investment plan in which the interest rate remains the same throughout the investment period. Therefore, you have a clear idea of how much you are going to receive at maturity. There is great flexibility when it comes to tenure. You can open a fixed deposit account anywhere between 7 days and ten years. The interest received gets added to your total income and is taxable as per your tax slab.

Medium Risk Savings Plans

Moderate-risk savings plans offer you a balanced and diversified investment option. In such plans, your investment goes to a bucket that has both debt and equity. Example of medium risk savings plans are:

a. Monthly Income Plans (MIPs)

Monthly income plans offer monthly income out of your investment which can be in either of the following two ways:

  • Interest/dividend payment every month
  • Payment of invested amount every month (annuity plans)

Some of these plans, like MIP mutual funds, also invest in equity stocks.

b. Arbitrage Funds

Arbitrage funds are a special type of mutual fund which benefits from market imbalances. Since the positions are opposite to each other, these funds carry little risk in any market situation. However, since the underlying investment has to be volatile, like commodities or equity stocks, these funds carry a higher risk than fixed-income debt funds.

c. Corporate Bond Funds

These funds invest predominantly in corporate fixed-income issues, like bonds and convertible debentures. Since the range of rating of the instruments varies a lot, these funds carry a higher risk than other debt funds investing in more secure debt.

High Risk Savings Plans

a. Unit Linked Insurance Plan (ULIP)

It is a combination of investment and insurance. A part of your premium goes to insurance, and the balance is invested in the market. With most ULIPs, you have the option to choose whether you want your investment to go to equity, debt, bonds, or hybrid funds. As a survival benefit, you get the maturity amount depending on your Net Asset Value (NAV). In case the policyholder passes away, the nominee receives the sum assured.

New ULIP plans give you more flexibility in terms of investment options and are also cheaper.

b. Equity & Balanced Mutual Funds

A mutual fund is an investment plan in which your money or investment is managed by a professional called Asset Management Company (AMC). There are different types of mutual funds depending on the fund type. The different instruments in which mutual funds invest are debt, equity, bonds, etc. Depending on your risk appetite, you can choose a mutual fund scheme. When you invest in a mutual fund, you are allocated NAV, and your investment grows as the price of NAV increases.

5 Benefits of Buying the Best Savings Plans

You receive many benefits when you buy an investment plan. Some of the benefits are:

Wealth Creation

As an investor, you get the option to choose the type of investment you want to make depending on the risk you want to take and the returns you want. Most of the investment plans are long-term plans and offer good returns and hence help you create wealth over time.

Financial Security

A saving plan gives you returns as well as life cover. With the life cover option, you secure the future of your loved ones even if an unfortunate event happens.

Goal Based Planning

Investment plans help you invest for your long-term goals like a child's education, creating a retirement fund, etc. You can buy an investment plan for each of your goals and start investing regularly as per your comfort.

Retirement Saving

Retirement funds are not created overnight. You can invest in high-risk funds in the initial years of your investment and get high returns and later move to the low-risk investment. Investment plans are an ideal option to create your retirement fund over time.

Tax Benefits

Investment plans also give you the option to save tax. The premium paid towards investment plans is eligible for a tax deduction.

3 Saving Plans for Children by Canara HSBC Oriental Bank of Commerce Life Insurance

The cost of education in India is increasing with every passing year. It is expected to increase in the coming years as well. To ensure your children's education does not give you financial stress, you should have a child savings plan. It will help you plan the future of your child in a much better way. Some of the child investment plans offered by Canara HSBC Oriental Bank of Commerce Life Insurance are:

1. Invest 4G

This is a Unit Linked Insurance Plan (ULIP) that lets you invest in equity, debt, or a mix of both. The plan gives you an option to choose the Cover Option based on your needs. The plan also gives you an option to choose the policy term. Depending on your child's age or the time at which you require the fund for his/her higher education, you can choose the policy term. The plan also offers a life cover, so in case of the demise of the Life Assured, the sum assured received by the family can be used for the child's education or marriage.

2. Future Smart Plan

It is a unit-linked child plan that gives you the option to invest in your child's bright future. It comes with comprehensive insurance cover that ensures your child's future is safe in any unfortunate event. The plan allows you to make a partial withdrawal from the 6th policy year. You can use the amount for the expenses like the tuition fees of your child.

3. Smart Junior Plan

This traditional non-linked participating investment plan comes with a life cover and guaranteed pay out that you start receiving close to your child's educational milestones. You have the option to choose a flexible policy term depending on your child's education needs.

Smart Junior Plan | Child Insurance Plans | Buy Child Plan Online

4 Benefits of Child Investment Plans

1

Secures the future of the child with a life cover. In case of an unfortunate event, the sum assured ensures the family has a fund for the child's higher education.

2

Child plans also come with rider benefits like accidental death and critical illness.

3

Premium protection option ensures that all the due investment is made in the goal even when you are not there to fulfil the goal.

4

The premium paid towards a child investment plan is eligible for annual tax deduction up to a limit of 1.5 lakh under Section 80C of the Income Tax Act.

4 Factors to Consider Before Buying a Savings Plan

Some of the factors you should consider before buying an investment plan are:

1

The risk associated with a savings and investment plan

Different investment plans come with different levels of risk. You should know the risk level of the plan which you plan to buy.

2

Check all the terms and conditions

You should look for a plan where returns and benefits do not come with too many terms and conditions. Look for an investment plan with maximum transparency.

3

Past performance

One of the reasons you buy an investment plan is to get good returns. Check the past returns of the investment plan and evaluate if it is in line with your expectation and goal.

4

Charges

An investment plan charges you a minimum commission to manage your portfolio. You must check the commission of the plan you want to buy. Compare the commission with other similar plans and see if it is around the average of similar plans.

5 Things to Check Before Buying the Best Savings Plan

Financial Goals

When you have financial goals, you know the amount you need in the future, the amount you need to invest, and the returns you should expect. Create your financial goals and based on that choose the savings plan.

Investment Period

The longer you can stay invested the higher investment risk you can take and the higher growth you can expect. Thus, determining the time to the goal will help you take adequate investment risk and choose saving plans for the same.

Income & Savings

You should know your income, expenses, and savings. Based on your savings, you will decide how much premium you can pay for your investment plan.

Future Expenses

You must not only understand your current expenses but future expenses as well. When you decide to buy an investment plan, you commit to paying a premium for a certain number of years. You should evaluate your future expenses and decide if you can still pay the premium comfortably.

Insurance Cover

Depending on your liabilities, you should purchase a comprehensive insurance plan that gives you a high sum assured.

Riders Available in Saving Plans

Riders provide you with additional coverage options and come at an additional cost. They offer financial cover over and above the basic sum assured. Some of the riders available in investment plans are:

Critical Illness Rider

If you are diagnosed with any critical illness such as heart attack, cancer, kidney failure, you receive rider benefit.

Accidental Death Riders

If the policyholder dies accidental death, the nominee receives the sum assured plus the rider benefit.

Waiver of Premium

If you suffer from a severe disability due to an accident, this rider waives your life insurance premium amount.

Accelerated Death Benefit Rider

If you are diagnosed with any critical illness, you receive a part of the sum assured in advance.

Eligibility Criteria

You can buy a saving plan if you meet the below condition:

  • Starting age for investment plans may vary from 0 to 18 years depending on the type of plan
  • Maximum entry age also varies for different plans starting from 45 years to 65 years
  • Maximum age at maturity may depend on the type and purpose of the plan. For example, a pension plan may last up to 100 years of age, while PPF investment may continue only up to 85 years of age.
  • You should be in a financially sound condition to invest in life insurance plans.

Documents Required

You need to have the below documents for buying the best savings and investment plan:

  • Age proof document like passport, voting card, etc
  • Identity proof like Aadhar, PAN Card, etc
  • Address proof like Driving license, passport, voting card, etc
  • Income proof like a bank statement, salary slip, etc

Steps to Buy the Best Savings Plan in India

The best investment plans help you invest your money in various money market instruments in a systematic way so you can achieve your financial goals. Follow the below steps to buy the top investment plan in India:

  • 1Know your financial goals and your requirements.
  • 2Figure out the tenure of all your goals.
  • 3Evaluate how much you can invest in a savings plan and see if the sum assured, and life cover matches your requirement.
  • 4Shortlist the saving plans matching your investment goals and tenure. Check the investment plan does not have high commissions.
  • 5You can buy a single investment plan for all your goals or one plan for each goal, depending on what you are comfortable doing. If you decide to buy a single investment plan, ensure it is diversified to reduce your risk. If you decide to buy multiple investment plans, create a diversified portfolio of investment plans.
  • 6Review your investment plan once or twice a year and see if it is performing as per your expectation.

Best Saving Plans for Middle Class in India

Below are some of the best saving plans for the middle-class people in India. Depending on one's needs, financial goals, risk appetite and affordability, one or more saving plans can be considered from the below list:

Saving and Investment Plan Returns Risk
Direct Equity (Stocks) High High
Public Provident Fund Medium Zero Risk
National Pension Scheme (NPS) High Low to medium
Mutual Funds Medium to high depends on the type of mutual fund Medium to high depends on the type of mutual fund
Unit Linked Insurance Plan (ULIP) Medium Medium

Objectives of Buying a Savings Plan

There are different savings plans for investors depending on their financial needs and goals. However, there are a few common objectives of buying a saving plan for investment. They are:

  • Security

    Every investor wants financial security in life and saving plans provides you just that.

  • Wealth Building

    The next objective of a saving plan is to grow your money more than the inflation and tax. You can create a huge corpus for your long-term goals, like retirement, if your saving plan can beat inflation and taxes.

  • Tax Reduction

    You can increase your investment if you have lower tax liabilities. Another objective of these saving plans is to reduce your tax liabilities.

Four Best Saving Plans for 5 years

You have a lot of options to choose from if your investment horizon is five years. You can either go for low and moderate-risk investment plans. Some of the best saving plans for five years are:

ULIPs

With minimum charges and a range of fund options ULIPs are one of the most tax-efficient and growth-oriented investment plans for five years. The annual investments and fund value both will be exempt from tax.

Invest 4G from Canara HSBC Oriental Bank of Commerce Life Insurance is a ULIP that can help you to create wealth while also protecting you with a life cover.

Debt Funds

You can invest in debt mutual funds. Debt funds are those that invest in government securities and rated corporate debt. There is no lock-in, and you can withdraw funds as and when you need them. Also, for five years you will receive the benefit of indexation on the maturity value.

Post Office Time Deposits

These are some of the safest options which give you higher returns. You receive interest every year on the amount you have invested. You get high liquidity, and you can expect 7% returns in this savings plan.

Equity Linked Saving Schemes

If you have a high-risk appetite and want higher returns, you can invest in ELSS mutual funds. These funds offer tax-deduction on the invested amount under section 80C. The funds have a lock-in period of three years and capital gains below Rs. 10 lakhs are exempt from tax.

How to Buy the Best Savings Plan Online in India?

Once you have evaluated the plans on various parameters and decide to buy the best investment plan as per your financial requirements, you can buy the plan online by:

  • 1Visit https://www.canarahsbclife.com/index.html and select your plan.
  • 2Fill in the required details as requested in the form.
  • 3Select the desired option like tenure, premium amount, etc.
  • 4Post selection, you will have to fill the proposal form.
  • 5Upload the KYC document like Bank Mandate form, Income Statement, Proof of ID, Medical report, etc.
  • 6Post verification and premium payment, the policy will be delivered to you.

When is the Right Time to Buy a Savings Plan?

Some goals are common to all investors like buying a house, child's education, building a retirement corpus, etc. To achieve these goals, buying the best saving and investment plan is very important. The right time to buy an investment plan is NOW. Even if you are in your early 20s, you should buy an investment plan. The sooner you start, the better it is. Because when you start early, you get more time and scope to plan and invest your finances as per your risk appetite. When you give more time to your investment to grow, it grows much faster because of compounding.

FAQs

Why should I buy an investment plan?

You should buy an investment plan for the below reasons:

a) To secure your and your family's future

b) Create wealth over time

c) Get tax exemption under Section 80C and 10(10D)

How can I get higher investment returns?

If you are looking for higher investment returns, you can buy an investment plan that gives you an option to invest in equity-related instruments.

Where can I invest my money in my 20s?

When you are in your 20s, you don't have many responsibilities. so, it is the best time to invest your income. You can buy investment plans depending on your risk appetite and your financial goals. You can opt for equity-related investment plans.

How much money do I need to retire at the age of 55?

It depends on a lot of factors like your lifestyles, liabilities, etc. In general, you should have at least 18 times your annual income if you want to retire at 55.

Are investment plans risk-free?

Every investment has a certain amount of risk. An investment plan gives you a variety of options to choose from, and if you have a low-risk appetite, you can choose an investment plan that comes with the least risk.

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