The first thing we are taught from the early days of our childhood is to start saving. The concept of setting some money aside today to enjoy your tomorrow is deeply ingrained in our culture and family values. It is because of this value, many people in India consider a savings plan to be the best investment option in India.
Let’s talk about what savings schemes are and how you can benefit from them in the future as an investor. We will also discuss detailed steps in choosing the right savings plan for your needs.
What are Saving Plans?
A savings plan, as a life insurance product, allows you to save, invest, and create wealth to meet your future needs. They are designed to help you to start saving regularly and reap the benefits of its returns when you need it.
The right savings plan comes loaded with features that are suitable for each individual’s needs and specific requirements. Moreover, these plans also offer insurance coverage that allows you to safeguard your family’s financial future, should something untoward happen to you.
Benefits of Saving Plans
Saving plans are a preferred choice for many investors because of the benefits that it provides. Here are some of these benefits:
- Financial coverage: As a life insurance product, saving schemes offer financial coverage to your family in case of your untimely demise.
- A habit of regular saving: When you invest in a saving plan, you are encouraged to instill financial discipline in your life. It is perhaps the most significant advantages of investing in a savings plan.
- Wide range of flexible features: When it comes to financial savings, there is no such thing as a one-size-fits-all approach. Each individual has its priorities and life goals. Your savings plan will take that into account and offer a wide range of flexible features that can be customized to meet your needs. You are also able to switch or increase/decrease your investment options as per your risk appetite.
- Saves taxes: This is another key benefit of investing in a savings plan. When you invest in this life insurance product, you become eligible for tax deduction under section 80C of the Income Tax Act. The maturity amount is tax-free u/s 10 (10D) and the TDS rates do not apply to them.
Choosing the Right Saving Plan
The best savings plan comes with a wide array of products to choose from. If you want to pick the right one of your needs and budget, then you must first define your goals and investment priorities. Since the market is flooded with several savings plans, you have to define your financial priorities to make a wise choice. Here are a few steps to make an informed decision.
- Determine your budget: Before you look for savings instruments, you should define your budget to understand how much you can invest reasonably. It will help you select the right plan that you can afford through its investment term and help you pay the premium regularly.
- Start by saving more: The only way to ensure wealth creation is to save rather than spend. Before you pay off your bills and rent, lock away your savings. You can select automated investment options with standing instructions such as recurring deposits or a mutual fund SIP. This way, you can ensure that your savings and investment goals are being fulfilled mandatorily.
- Link your investment and goals: The best way to fulfil your financial goals is to pick the right financial product. Knowing why you are saving and how much time you have to reach that goal will help you plan your investment for the best rewards. If you are looking at long term goals such as buying a house or saving for retirement, then you must consider investing in renowned savings and income plans. For short-term goals, such a buying a car, you can set aside a fixed deposit.
- Keep your liabilities in control: The cycle of debt is never-ending, often leading to another. This usually happens when there is no solid repayment plan in place. Overspending has become a sad reality, especially with personal loans and credit cards being readily available. However, before you get tempted to take on more debt, make sure that you know how you will repay.
- Do invest in getting a life cover: Always add health insurance and life insurance plans to your list of priorities. It is because it is easy to lose your hard-earned savings during illness, leaving your loved ones at a financial risk. These plans often come cheap and are a great addition to your investment portfolio to make a robust savings plan.
Other than these steps, you must also ensure that you have educated yourself about the specifics of your investment plan. Consider factors like features, flexibility, and rider options before investing.