A savings plan can be simply defined as a life insurance plan, which offers an individual with different prospects to save and accumulate funds for the future. These savings schemes help an individual invest in a systematic and disciplined way to easily achieve their short-term and long-term objectives of life.
Apart from offering the benefit of wealth accumulation, the savings plan also offers the advantage of insurance coverage.
Opting for the best investment options for wealth management is a major area of concern for people of all income groups. Choosing the top investment options in India is one of the ways you can make money grow over the years.
Importance of a Savings Plan
A well-defined savings plan helps an individual be adequately prepared to meet his family’s future financial needs and ensure that the goals are met properly.
Savings plans are introduced by the Government of India and different public sector banks along with other financial institutions. The main benefit of the savings schemes is that they are backed by the government, thereby ensuring complete safety and security of the interested capital. A savings plan is one of the most popular low-risk financial instruments, offering guaranteed returns in the long run.
There is a range of different savings schemes available in the Indian market, and it can be categorized based on the parameters like popularity, returns and financial security. In today’s time, savings plan are regarded as a good investment option due to security, reliability and dependability. Let’s look at the different types of savings plan that are available in India:
- National Pension System (NPS)
National Pension System is a popular savings scheme, which primarily focuses on a secure source of monthly income after retirement. In order to avail the benefits that are offered by the National Pension System, the employees are supposed to make a small contribution as premium payment towards the scheme.
The lump-sum amount that is accumulated throughout the end tenure of the scheme is broken down as annuities and is later paid to the applicant every month post-retirement.
- Public Provident Fund (PPF)
Public Provident Fund or PPF as it is commonly known, is a long-term savings plan which was introduced by the National Saving Organization, it offers a term period of 15 years. PPF is regarded as one of the safest investment options because it offers a fixed interest rate of 7.9%. The interest earned on PPF is tax exempted.
Besides, PPF offers flexibility as it can move from one bank and post-office to others. This savings plan allows you to make a minimum contribution of INR 500 and you can invest up to maximum INR 1.5 lakhs.
- Term Plans With Return On Premiums
Every one of us wants to live a long and cheerful life in the presence of our family members and friends. Term insurance with return on premiums (TROP) offers an advantage over regular term plans. How so? Well, TROP offers to return the premiums if you successfully survive the maturity period. Whereas, with regular term plans, one only enjoys the death benefit.
Additionally, you can also opt for add-on riders such as waiver of premium benefit, accidental death benefit, disability benefit, and protection against critical illnesses.
Here are some of the most critical considerations that you need to keep in mind while investing in a savings plan:
- Financial Goals
Setting short-term and long-term financial goals bring a lot of clarity. Goal setting may appear to be a tedious task, but once you go through the process, you will be able to make use of the best savings plan in India.
Ideally, you can set your goals for 1 year, 3 years, 5 years, 10 years and so on. The broad objective of the best savings plan may include purchasing a new house, saving money for your child’s higher education, marriage, and planning well for retirement.
- Flexibility and Transparency
A comprehensive savings plan offer great scope for flexibility with options like-
- Conveniently switching between investment funds with different types of risks as per changing needs
- The provision to withdraw partially from one’s own funds
- Single premium additions enable the policyholder to invest additional sums of money over and above the regular premium
- Risk Profile
It is extremely important that you should invest carefully and strike a right balance between risk and returns in the savings plan. Therefore, it is advisable that people in their early 20s and 30s should opt for riskier investment options.
If you are investing in a savings plan for the first time, you should explore options from trusted insurers like Max Life Insurance. Based on your income level and needs, you can opt for the plan that will cater to your requirements the best. Remember that savings plan can help you create a stable income and secure the family’s financial future, even in your absence.
