A Detailed Guide on How to Select the Best Saving Plans in India

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    One of the basic reasons why people invest in various savings plans and carefully gauge return margins is to realise the dreams and goals they want to financially support and achieve in the foreseeable future. Investing in the is a vital tool in that pursuit. The ultimate goal behind sustainable wealth creation over an extended period of time is to live with financial security while also being relieved about the future and the expenses it may bring.

    The planned practice of allocating a sum of money and consciously setting it aside for future purposes or as an emergency fund is called . This corpus grows gradually, where a policyholder may have a monthly designated sum which is chunk of their earnings; and set it aside for an impending expense they might have visibility for. This saved corpus may be for personal goals or short term expenses such as property maintenance or purchase, travel or even unforeseen emergencies etc.

    Savings can be set in saving schemes or fixed deposit accounts in bank saving schemes among a host of other types of investments available as well. Saving plans are one of the best investment options in India. Most saving plans in India have the additional benefit of being government backed, where it is a step to incentivise financial literacy and planning. Hence, saving plans are a useful method saving for one’s future in a secure and regulated space.

    Let us take a closer look at the various features and benefits of investing in saving plans:

    1. Premium/Investment Amount

    A standard feature that is recurrent in , it is the nominal payment that is paid to the investment provider by the policyholder on a regular basis throughout the stipulated policy tenure. This premium payment maintains the fund that is managed by the investment provider and substantially adds to the payout that is assured to the beneficiary at the end of the policy term.

    2. Interest Rates

    Saving plans that are structured in a manner where the investor places their corpus or premiums in a secure space regulated by the investment provider often have an interest rate at which the investments grow. These interest rates are important for sizeable high returns.

    3. Payout Benefits

    Saving plans are meant to support an investor’s finances by gauging their future goals which may require economic reinforcement. In that regard, one should choose if monthly payments are more beneficial to them than a lump sum payment. As saving schemes are driven towards being plans focussed on future use, the payments towards them can also be structured to the benefit of the investor.

    A tree is planted between the coins - best saving plans

    4. Coverage

    Some saving plans offer coverage during the course of the policy tenure, however it is subject to the existing amount accumulated by them under the policy. Plans like ULIPs provide insurance benefits as well, where for plans like PPFs one can take loans against the accumulated amount after a specific time period of the plan has elapsed. There may be factors such as lock-in period, or reduced payout benefits in the event the investor needs to access those funds.

    5. Capital Growth:

    Saving is an important step if an investor is seeking to grow their personal corpus by exponential margins. Savings cannot help grow money, but allocated savings that are built towards investments that grow with the help of interest rates are great instruments to help capital growth.

    6. Tax Benefits

    Saving plans are universally recognised as essential, therefore most of them come with tax exemptions and benefits under section 80C of the Income Tax Act, 1961. Some saving plans for income tax reduction are PPFs, National Pension Scheme, ELSS and ULIPs.

    As with most plans, there is an abundance of saving plans available in the investment market today, and one should do comprehensive research when looking for the best suited saving schemes that serve their purposes better.

    Therefore let us look at the things to consider while buying saving plans:

    1. Flexibility

    Investors who value and seek high liquidity and are more adept at being able to access their corpus as per their monetary requirement are best suited to be investing in saving schemes. A savings plan is ideal l because of its accessibility and simple investment premise. However with there being many kinds of saving schemes available in the market now, one should read the policy documents carefully and check for any withdrawal or exit charges before investing.

    2. Risk Involved

    As savings are often practiced independently by policyholders preparing for a fixed expense they are expecting, there is little possibility of their funds suffering or deteriorating. Savings Accounts and Fixed Deposits are some of the most trusted saving schemes as they provide fund security and guarantee steady returns.

    Market-linked investment plans such as ULIPs and mutual fund equities however, have higher risk margins as they are directly affected by market-crashes or other major economic developments. Therefore, before purchasing saving schemes, one should duly take their risk appetite into consideration.

    3. Foreseeable Large Expenses

    Goals such as a child’s education, marriages, property purchase can be financially draining. Therefore a good saving plan can help an investor build their corpus early and in an organised fashion so that they don’t exhaust their personal funds meant for future security such as retirement.