If you want to maintain a sustainable amount of wealth, you must learn the crucial habit of channelizing your savings in the right mediums. Whether you have a short- or long-term goal in your mind, proper savings can help you achieve nearly all the financial milestones of your life. To mobilize your savings and enjoy returns over your capital, a saving plan surely fits the bill for you. However, to make sure your investments work the way you intended, you need to know a thing or two about savings plans first. With that said, this article discusses almost everything you need to know about savings plans, including details like what they are, why they matter, and what you should know before getting one.
What are Savings Plans?
A savings plan is a variant of a life insurance policy that allows you to accumulate capital in a highly organized manner, which can be used to fulfill both your short- and long-term goals and aspirations in life. These plans offer a wide range of features that help you meet your monetary requirements by making regular and consistent investments as per your financial preferences and risk appetite. They also provide you the benefit of insurance coverage in addition to the practice of wealth accumulation.
Furthermore, in the event of your unfortunate death during the tenure of your savings plan, your selected nominee receives a specified amount of money known as ‘Mortality Benefit’ under the savings plan. These plans are either regulated by financial institutions, the government of India, or even banks in the public sector. They’re one of the safest investment options available in India, especially if your main purpose is to build wealth as they carry very low risk and ensure higher returns.
Why Are Savings Plans Important?
1. Financial Security
Being a subset of a life insurance policy, the savings plans offer adequate financial coverage to your family and dependents in the event of your unforeseen death during the tenure of the policy. In addition to the assured payouts, the coverage benefit associated with savings plans allows you to deploy a financial safeguard for your family in case of any mishap.
2. Disciplined Savings
Although everyone knows about the importance of financial savings in life, yet only a fraction of people make it a regular habit in their lives. That’s when savings plans come into play. The most prominent thing about purchasing a savings plan is that it encourages you to make consistent investments over a specified timeframe, which eventually helps you develop disciplined savings habits in the future.
3. Greater Flexibility
Everyone has different priorities and goals in life. A savings plan can be oriented as per your requirements, which makes it a highly flexible investment option available in India. You can feel free to customize a savings plan as per your financial preferences and future goals. It allows you to choose from various investment criteria, including several types of funds and payout options. You can even switch your investments based on your risk appetite and make your investments sounder.
4. Tax Savings
The savings plans offer the same tax benefits as that of a standard life insurance policy. This means you can enjoy tax exemptions of up to Rs. 1.5 Lakhs for the premiums you’ve paid towards the policy as per section 80C of the Income Tax Act of India.
There are certain savings plans available as per your financial goals in life. For instance, if you want to save capital for your child’s education, you can choose a child savings plan to accumulate funds for their higher education. Depending on your aspirations in life, you can choose from a variety of savings plans that allow you to hit your strides efficiently.
Things to Keep in Mind While Choosing a Savings Plan
1. Your Goals
The first thing that you should keep in mind before choosing a preferred savings plan is your short- and long-term life goals. It allows you to bring clarity to your preferences and help you choose an ideal policy as per your requirements.
2. Your Risk Appetite
After choosing a preferred savings plan for your aspirations, you should consider maintaining a proper balance between risk and reward based on your risk-bearing capacity. Make sure you don’t blindly go for a high-risk investment just because it promises better returns.
While choosing a savings plan, make sure that it provides adequate liquidity to fulfill your financial needs. The funds should be readily available to you in times of emergency. Therefore, consider a plan that offers good liquidity.
Best Savings Plans Available in India
1. ICICI Pru Future Perfect Plan
The ICICI Prudential Future Perfect Plan is a long-term, tax-free and simple way to save for your children’s higher education costs. It works by locking in the interest rate for the full term of the plan and hence, guaranteeing returns. The flexible monthly premium payment option makes it convenient to meet your financial goals.
2. Canara HSBC Oriental Bank of Commerce – Invest 4G Plan
Invest 4G Plan is a simple and smart savings plan for young investors. It allows you to start saving early for your long-term goals. It is designed to help you invest for your future by providing you tax-free income and allowing withdrawals at a young age. The plan also allows you to choose from a range of investment options with attractive interest rates and built-in tax benefits.
Let’s face it, no one likes to think about the possibility of illness, or adjusting to the daily needs of an infant when there is a newborn in their home. However, by adding the best savings plan to your family’s life, you will put yourself in a better position in case an unexpected event occurs.