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Why invest in a savings plan in your late 20s?

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July 27, 2023

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If you are quickly approaching your late 20s, you may be getting ahead in your career and enjoying the newfound financial freedom that this phase of life offers. Investing, purchasing life insurance and saving up for retirement may be goals that you would have put off for your 30s or later.  

However, this is a crucial stage in your life, and taking the right financial decisions in your late 20s can help prevent many costly financial mistakes in the future. One such important financial decision that you need to take is investing in a savings plan.

What is a savings plan and how does it work?

A savings plan is a type of life insurance policy that combines the benefits of a life cover and guaranteed savings. When you purchase a savings plan, you can choose the sum assured, which is essentially the life cover you will receive under the policy. This life cover will be valid for a specified period, known as the policy term. In case of your demise during this period, your beneficiary or nominee will receive the death benefits guaranteed under the plan.

In addition to this benefit, a savings plan also offers assured maturity payouts. These payouts are made at the end of the policy term, if you survive the said period. Since the maturity payouts from a savings plan are guaranteed, these are among the best investment plans in India for conservative investors looking for assured benefits.

As with all life insurance plans, you will have to pay premiums to the life insurer in return for the life cover. You can pay this premium on a monthly, quarterly, semi-annual or annual basis.

4 reasons to invest in a savings plan in your late 20s

Now that you know how a savings plan works, let’s take a closer look at why this is one of the best investment plan in India, and why you can benefit from investing in a savings plan in your late 20s.

Financial security for your dependents

In your late 20s, you may be married and planning to have children. Or, you may already have a child or two. So, in case something untoward happens to you, your spouse and children may suffer financially due to the loss of income.

With a savings plan, however, you can put this worry to rest because the policy acts as a reliable financial safety net for your spouse, children and any other financial dependents. The death benefits paid out by your life insurer can be used by your loved ones to meet their financial requirements and life goals.

Fulfillment of long-term goals

You may have many long-term financial goals like purchasing your dream home, paying off your debts or saving up for your children’s education. In your late 20s, these goals may still seem further away. However, by planning for these goals early in life with the right strategies, you can achieve them without any hassle.

Investing in a savings plan is one such strategy, because it offers guaranteed maturity payouts if you survive the policy term. These maturity benefits are often paid out as a lump sum amount, so you can use the payout to fund your long-term goals.

Effective retirement planning

Planning for retirement is another long-term goal that everybody should take care of. If you are yet to enter your 30s, you may have put off retirement planning for later — perhaps till you are in your 40s or 50s. However, by purchasing a savings plan in your late 20s, you can ensure that you get a headstart and plan for your retirement effectively.

The guaranteed benefits from a savings plan can add to your retirement corpus significantly. Some savings plans also give you the option to receive your payouts in the form of regular income, so you can replace your regular income easily once you retire.

Reduced tax liability

By the time you reach your late 20s, you may have received several pay hikes and promotions that would have increased your overall tax liability. With the tax benefits offered by a savings plan, you can reduce the overall burden of tax easily.

As per section 80C of the Income Tax Act, 19611, the premiums that you pay for your savings plan are deductible from your total income, up to Rs. 1.5 lakhs per year. This effectively reduces your total taxable income, thereby also reducing your total tax liability. 

Conclusion

Above all, buying a life insurance plan when you are younger also means that you get the added advantage of lower premiums. As you age, the premiums that life insurers charge will also increase. So, by purchasing a life cover when you are still in your 20s, you can lock in affordable premium rates and get the advantage of a significant life cover at affordable prices.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Disclaimer

  1. Subject to conditions specified u/s 80C of the Income tax Act, 1961.
    The afore stated views are based on the current Income-tax law. Also, the customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.
  2. *Guaranteed Benefit is paid on survival during policy term provided all due premiums are paid during
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