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Why Your Savings Strategy Needs an Upgrade (Hint: It’s Not Just About Returns)

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March 21, 2025

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There have been certain financial methods of the past that has worked well. They offered a sense of security, even if they didn’t generate much wealth over time. However, times have changed.

With rising costs and unpredictable financial challenges, relying solely on traditional savings might not be enough anymore. This is where modern savings plans come in. They don’t just help build a bigger corpus but also protect the wealth you accumulate. Instead of choosing between old and new, why not use both? A combination of time-tested saving habits and structured financial plans can set you up for a stable future. So, your short-term needs will be covered while long-term goals would stay on track.

Take an example. If you save ₹10,000 a month in a fixed deposit offering 6% interest, you’ll have around ₹2.3 lakh in five years (post-tax returns will be even lower). Meanwhile, a savings plan from a life insurance provider could grow your wealth while also securing your family’s financial future. The key is to rethink the way we save, without giving up what’s familiar.

Why traditional savings alone may not be enough

Think about how much life has changed in the past decade. Expenses have soared in ways that many didn’t expect. Monthly groceries that cost ₹2,000 a few years ago might now cost ₹5,000-10,000. Medical bills have climbed as well. Education costshave skyrocketed, with school fees increasing consistently. The reality is, day-to-day is getting expensive, and relying on old savings habits may not be enough to keep up.

Financial goals have also changed. Earlier, people saved for a home, a child’s education, and retirement—mostly in that order. But today’s goals are more diverse. Some want to start a side business, others aim for early retirement, and many dream of travelling the world. A single savings approach may not be flexible enough to support such varied aspirations.

Then there are the surprises, such as medical emergencies, sudden job losses, or unexpected family responsibilities. These don’t come with a warning, and having only a small savings buffer may not be enough.

Traditional savings tools like fixed deposits or recurring accounts offer stability, but their growth is often limited. Inflation can quietly eat into returns, leaving you with less purchasing power over time. For instance, if inflation averages 5% annually, a fixed deposit earning 6% may only give you a real return of 1%. That’s barely enough to keep up, let alone grow wealth meaningfully.

Now, when you look at a structured financial plan, it helps money grow and provides a financial safety net. Savings plans offered by life insurers can build a larger corpus while offering long-term security. These plans work alongside traditional savings, helping you create a balance between liquidity for short-term needs and protection for future goals.

Combining traditional savings with new-age financial plans

Moving from old savings methods to structured financial plans doesn’t mean abandoning what’s familiar. Instead, it’s about making both work together. A solid financial strategy mixes the reliability of traditional savings with the growth and security of modern options.

For example, keeping a portion of savings in fixed deposits or recurring accounts results in quick access to cash for short-term needs. But relying entirely on these options may not help with long-term wealth creation. This is where savings plans come in. They offer a structured approach to growing money while also providing financial protection.

Imagine a family setting aside ₹15,000 a month. If they put the entire amount into a traditional deposit earning 6%, the returns might not keep up with inflation, reducing their purchasing power over time. Now, consider a different approach. They invest ₹10,000 in a life insurance savings plan, which not only helps their money grow over the years but also provides financial security for their loved ones. Meanwhile, they keep ₹5,000 in a recurring deposit or a liquid savings account to handle immediate expenses.

This approach works across life stages. Young professionals can use it to balance short-term expenses with long-term financial security. Parents can create a stable education fund while keeping some savings accessible. Retirees can generate steady income while maintaining an emergency buffer. The goal isn’t to replace old savings habits but to enhance them for a more secure future.

Why a savings plan offers more than just returns

A savings plan isn’t just about growing money, it’s about securing your future. Unlike traditional savings tools that focus solely on accumulating funds, these plans provide an added layer of protection.

For instance, if someone saves diligently for years but faces an unexpected crisis, their traditional savings might not be enough to cover the financial setback. A savings plan, on the other hand, offers more than just accumulated wealth. It comes with life cover, meaning that a family’s financial goals stay intact even in the absence of the policyholder.

Another advantage is disciplined investing. Bank deposits can be withdrawn easily, making it tempting to dip into them for non-essential expenses. A savings plan instils financial discipline, helping policyholders stick to their long-term goals. This is because unnecessary withdrawals are not easy in these products.

Moreover, these savings plans often come with bonuses and guaranteed benefits. These offer a level of predictability that market-linked instruments might not always provide. So, savings plans are an effective way to balance security and growth without excessive risk.

By integrating a savings plan into an overall financial strategy, individuals can build a future-ready corpus without relying solely on traditional savings. It’s about having the right financial safety nets in place while making steady progress toward long-term goals.

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ARN: ED/03/25/22489

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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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