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How to Choose Best Savings Plan

Right from the day we start earning money, we are flooded with lots of advice regarding when, where, and how much money to invest, suitable? From our parents, friends, and colleagues, everyone has their own piece of advice. ...Read More

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How to Choose Best Savings Plan

How to Select the Perfect Savings Plan

How to Choose the Best Savings Plan
September 04, 2024

Table of Content

 

What is a Saving Plan?

A savings plan is a type of life insurance that allows you to save & accumulate funds over a period of time, which helps fulfil your future financial needs. Such plans are primarily designed in such a way that you, the policyholder, can inculcate a disciplined saving habit besides earning significant returns from the savings plans.

Why Do You Need a Savings Plan?

A savings plan enables you to secure your future and that of your family by providing the wings of financial freedom. This plan provides financial security so that you, the policyholder, can take calculated risks if needed, with the savings already there to back you up, especially when planning to pursue your passions, such as kickstarting a new business or buying a new house.

Benefits of Savings Plan

  • Flexible And Customizable Options

    • As each of us is unique, our life goals, priorities, income, etc are different, right? That is precisely why savings plans factor in this aspect and thus offer a wide range of flexible features which can be customized to meet everyone's distinct financial requirements.

  • Save Taxes

    • Savings plans also offer income tax benefits under Section 80C* of the Income Tax Act. The premium you pay towards these policies can be availed as a tax deduction of up to Rs 1.5 lakh in a year.

  • Financial Protection and Regular Payouts

    • By having savings plans in place, you provide the much-needed financial protection and regular payouts for the future of your loved ones in the unfortunate case of your unexpected demise.

  • Achieve Your Goals Successfully

    • When in doubt regarding how to choose the best savings plan, do not forget to consider your goals, and then accordingly select the plan that would help meet those goals timely, such as your child's higher education, home loan downpayment amount, or your retirement corpus.

The Right Way to Choose the Best Saving Plan?

1. Risk Profile and Capacity:

Determine your risk profile in order to identify and choose the best savings plan. Whether you are a risk averse or a risk taker investor would depend on factors like age, number of dependents, etc.

2. Investment Tenure:

When determining how to choose best savings plan, do not forget to factor in the time duration for which you are planning to save your money. Different savings plans cater to different investment tenures, such as short term or long term.

3. Long-Term Objectives:

You need to be absolutely clear about your intent behind the purchase of a savings plan. If you have clarity regarding why you need to save and what goal you want to achieve, especially if they are long term ones, you can then explore and compare various savings plans.

4. Flexible Savings Plan:

When planning on how to choose best savings plan, it can be wise to opt for a versatile strategy that would help achieve the set goals in different time periods, besides also catering to your unexpected short term financial needs such as emergency.

5. How Much Different Savings Plans Cost:

Do not forget to factor in how much a savings plan costs. When choosing an ideal savings plan, have a thorough understanding regarding not just the premium but all the other charges and fees involved. Also, understand the terms and conditions properly so that you end up making an informed decision in terms of the affordability and benefits of the plan.

6. Identify Your Goals:

It is crucial also to identify your short-term, medium-term, as well as long-term financial goals, such as buying a car in the next 2 years or retiring in the next 20 years. Being aware of your goals would help when making the decision of how to choose best savings plan.

7. Consider Your Risk Tolerance:

Whether you are comfortable with the stock market's fluctuations or instead prefer safe and guaranteed returns, knowing this would assist in choosing the right savings plan.

8. Investment Tenure:

For how many years do you plan to invest in a savings plan? 1 year, 5 years, or 30 years? Your investment tenure would play a key role in choosing the appropriate savings plan.

9. Plan Features:

Understand and compare various savings plans’ features, such as rider options, guaranteed bonuses, loyalty additions, etc. Accordingly, opt for the plan that offers benefits aligned with your financial goals and requirements.

10. Flexibility and Liquidity:

Do not forget to assess the savings plan's flexibility in terms of payment of premiums as well as the withdrawal options that are available when unexpected situations require some liquidity.

11. Cost Comparison:

Another crucial aspect when planning on how to choose best savings plan is to compare various plans’ premiums, returns, costs, etc. Select the plan that offers a complete package with appropriate features and affordable premiums.

12. Reputed Company:

When comparing various savings plans, it is wise to research and opt for insurers who have been financially stable, reputed, and also trustworthy upon checking their previous track record.

Understanding How Flexible the Savings Plan Is

  • Flexible Contribution Amounts

    • One of the main advantages of a savings plan is the degree of flexibility it offers in terms of the contribution amounts. Unlike many other investment options that typically require a fixed monthly or annual investment contribution, the savings plans often allow you to choose the amount you wish to invest in the plan. Whether you have a large amount to invest or a small contribution that can be invested regularly, a savings plan can offer to accommodate any of such preferences. Such flexibility ensures that investors across all income brackets, whether middle class or HNIs, can participate and also benefit from the features of this plan.

  • Variety of Investment Choices

    • One more aspect of flexibility that a savings plan offers is the availability of a variety of investment options. Such plans typically provide a range of investment portfolios or funds to choose from, which cater to different risk profiles and financial goals. So, whether you prefer to be a conservative investor or a risk taker, there is likely to be a savings plan that suits your investment plan’s preferences.

  • Cash Availability and Withdrawal Choices

    • When thinking about how to choose best savings plan, another significant concern you may have is the lack of liquidity. However, fret not, as savings plans primarily do address this issue by offering liquidity as well as withdrawal options. Although these plans are mainly designed for long term investment horizons, they do provide flexibility in case of financial emergencies or unforeseen monetary requirements. Also, depending upon different plans' terms and conditions, you may get the option to make partial withdrawals or prematurely close the savings plan too. This degree of flexibility ensures that your money does not get locked away for an extended period, and you can have cash availability when the need arises.

Summary

When planning to invest your hard earned money, do not be too lazy to research the available savings plan options. Given that savings plans offer a plethora of benefits, like a wide variety of plans, flexible features, as well as tax benefits, it's crucial for you to understand how to choose best savings plan in India as per your financial goals and requirements. Making the right choice of savings plan would secure your family’s financial future and also grow your wealth.

FAQs on How to choose best savings plan

Q. How to choose a savings plan?

Choosing the right savings plan would require you to compare the available and suitable options on factors such as premium cost, risk appetite, investment tenure, expected returns, flexibility, fees/charges, liquidity, withdrawal options, etc.

Q. Which is the best plan for saving?

There are many savings plans to choose from, such as ULIPs, PPF, money-back plans, NSC, etc. The best plan would vary across different individuals, depending on their life goals, age, risk profile, income, etc.

Q. What is the 50 30 20 savings plan?

The 50/30/20 rule savings plan is a budgeting strategy in which you need to bifurcate your monthly income into three buckets- 50% for needs, 30% for wants, and 20% for savings and investments.

Q. Which type of savings is best?

You can choose among the wide variety of savings plans, depending on your financial goals, investment tenure, risk appetite, etc. The best savings plan would help you achieve your set goals timely through wealth creation, besides securing your family’s financial future if you untimely die.

Q. Which scheme is best for monthly income?

Monthly income plan and annuity plan are among the popular monthly income options available in India.

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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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* 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.

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