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Who Should Invest In Savings Plan
  • 22nd Jul 2022 |
  • 2,652

A savings plan is one of the safest options to help you save money to fulfil the financial goals of your life. Saving provides stability and peace of mind while offering a financial “backstop” for life’s unforeseen events. Savings can act as “seed money” for higher-yielding assets like stocks, bonds, and mutual funds after an appropriate emergency fund has been developed.

The kind of savings plan that you must use depends on various factors, including:

  • Risk Appetite
  • Financial Goal
  • Time
  • Income etc.

Do you wonder who should invest in a savings plan? Individuals with an income and a financial goal can use a savings plan to invest and grow their money in the long run. Let’s dig deeper to get an understanding of the savings plan.

Types of Savings Plans

There are four types of savings plans you can use per your preference and future needs.

Endowment plan

An endowment plan refers to the insurance plan that offers the policyholder or the nominee a lumpsum amount on maturity or on death. It can be used to build a risk-free saving corpus and provide financial security to the family in case of sudden demise.

Features of the Endowment plan

  • Safe investment option with a minimum guaranteed return
  • Bonus addition benefits
  • Life cover and goal protection option

Money-Back Plans

The money-back plan is a type of insurance plan that allows the insured to receive a regular return or a lumpsum amount during the policy interval. The returns here can be guaranteed, depending upon the investment performance, or can be a combination of both.

Features of the money-back plan

  • Safest investment with guaranteed returns
  • Bonus additions payable on maturity
  • Cash flow maintaining option

Unit Linked Insurance Plans (ULIPs)

A Unit Linked Insurance Plan (ULIP) is an insurance plan that offers the dual benefit of investment to meet long-term goals along with a life cover to protect your family in case of an unfortunate event. A part of your premium is contributed towards the life cover, while the other part is invested in the funds of your choice.

Features of ULIP

  • Invest as per your risk appetite
  • Multiple investment options are available
  • Goal protection option available
  • Bonus additions for long-term investors

Retirement or Pension Plans

It is a type of investment plan that helps the policyholder to accumulate part of their savings over the long-term period so that they can stay financially stable. This plan helps you to deal with post-retirement uncertainties and helps to ensure a stable flow of income after retirement.

It is a type of investment plan that helps the policyholder to accumulate part of their savings over the long-term period so that they can stay financially stable. This plan helps you to deal with post-retirement uncertainties and helps to ensure a stable flow of income after retirement.

Features of pension plan

  • Long-term safer investment
  • Concerned with generating long-term stable cash flow
  • Bonus additions may be available
  • Life cover option avail*-able

Savings plan

It is beneficial for all those who wish to stay safe and financially sound in the long term. Let’s now understand the situation and which savings plan would be better for the investment - in case you are the head of your family, then you might need savings to meet the following long-term goals:

1. Higher education for children

2. Marriage goals for children

3. Home renovation work

4. Retirement savings for spouse

5. Family vacation goal

To meet these goals, you can apply for either an endowment plan, a money-back plan or a ULIP. All these investments offer a safe return.

Benefits of Savings Plan?

  • You can even apply for a savings plan if you want to offer financial coverage to your family even after you. All these plans will give you the advantage of securing your family in case of any unexpected events.
  • After your professional life is over, a retirement plan will help you seek a stress-free retirement and a comfortable lifestyle.
  • If you want to build wealth apart from your common financial goals, savings plans can help you do so. ULIPs are the best savings plan that can assist you in building wealth passively.

To get the benefits of your savings plan, it is advisable to start investing as soon as you start earning. You can then choose a savings plan according to your financial need, risk appetite, and investment horizon to achieve specific financial goals and live a stress-free life.

When to Buy a Savings Plan?

When you have a salary but little to no cash on hand, you should start saving. Make it a point to accumulate enough cash savings to last for six months’ worth of spending. This safeguards you from unanticipated financial crises like a car accident or job loss.

Long contract terms apply to savings plans (usually one or three years). As a result, buying Savings Plans is recommended if you intend to use them consistently over an extended period of time.


1. What are the savings schemes?

  • Unit Linked Insurance Plan (ULIP) A ULIP is an insurance plan that combines the twin benefit of investment to realise your long-term goals, and a life cover` to financially safeguard your family in case of an untimely incident. There are two portions to the premium paid for a ULIP.
  • National Pension Scheme (NPS) A specialised section of the Pension Fund Regulatory and Development Authority, which reports to the Indian government’s Ministry of Finance, is the National Pension System Trust. In India, a defined contribution pension scheme that is voluntary is known as the National Pension System.
  • Pradhan Mantri Vaya Vandhana Yojana (PMVVY) An insurance-cum-pension programme called PMVVY offers security to senior citizens.
  • Public Provident Fund The National Savings Institute of the Ministry of Finance introduced the Public Provident Fund (PPF) as a savings-cumulative-tax-saving vehicle in India in 1968. The scheme’s primary goal is to mobilise small savings by providing an investment with respectable returns and income tax advantages.

2. How do I create a savings plan?

Here are the ideal steps to create the right savings plan.

  • Decide why you want to save. Create an emergency fund if necessary.
  • Creating a SMART objective through goal-setting.
  • Determine the amount of money and the number of weeks you will need to save for that objective.
  • Divide your desired savings by the number of weeks you have available. Your weekly savings goal is that amount.
  • Consider ways to boost income or reduce spending to reach your weekly savings goal.

3.Are savings schemes tax-free?

Tax exemption is available on the investor’s investments up to a maximum of ₹1,50,000. ELSS (Equity Linked Savings Scheme), fixed deposits, life insurance, public provident fund, a national savings scheme, and bonds are a few examples of these assets.

4.Why is the savings plan important?

One of the key components of accumulating wealth and having a stable financial future is saving money. You may escape life’s uncertainties by saving money, which also allows you the chance to live a decent life. You can avoid many difficulties and barriers in life by setting aside money in a disciplined manner.

It can help you in times of need and ensure your family has resources in case something unfavourable happens. Depending on your ability to save, you can get a car, buy a house, or save money for retirement. You can secure your future and enjoy the most that life has to offer while still leading a very satisfying life.

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- A Consumer Education Initiative series by Kotak Life

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