How much money should I start saving at the age of 25?

The more you save before retirement comes knocking, the earlier you start. For instance, if you are 25 years old and are saving 15–25% of your income in addition to your monthly costs, you will accumulate a respectable sum of savings over time.

How much money should I accumulate using a savings plan?

You should set aside at least 20% of your salary for savings. More is wonderful, but conserving longer can require less.

Can savings plans help to save tax?

The Indian government permits various tax exemptions and deductions on the guaranteed savings plan following the requirements of the Income Tax Act of 1961. These deductions may be made by the taxpayer when submitting an income tax return.

Who is eligible to invest in a savings plan?

A National Savings Certificate can be purchased for a certain sum of money and provides the investor with a predetermined amount upon maturity. At maturity, investors receive their interest from NSC. Anyone above the age of 18 is eligible to invest in this tax-saving venture.

Should I pick a long-term or a short-term savings plan?

If you want to keep your money secure and are happy with small profits, choose short-term investments. However, you should put money into long-term investment opportunities if you want to make more money.

What is a Savings Plan?

A savings plan helps you set aside money regularly for your future, be it for your child’s education, your retirement, or even a dream vacation with your partner. It combines discipline and planning to help your money grow safely over time.

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Updated on: May 28, 2025

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What is Savings Plan?

A savings plan is a financial tool that helps you regularly set aside money to meet your future financial needs. It encourages discipline by making you commit to saving a fixed amount for a specific time. Over time, this money grows with interest or investment returns, helping you achieve your goals without stress. As savings plans are primarily a life insurance product, they also provide financial security for your family in case of an unfortunate event.

What are the Different Types of Savings Plans, and How Do They Work?

There are various types of savings plans, but their goal is the same, i.e., to help you save money and earn returns over time. Most plans work in a simple way: you regularly pay a fixed amount (called a premium), and in return, your money grows with time. At maturity or after a certain period, you start receiving payouts either as monthly income, a lump sum, or both. Plus, many plans also give you life cover.

Let us now look at the main types of savings plans and how they work:

Monthly Savings Plan

One of the most popular types of savings plans, this plan gives you a steady income every month after you have paid premiums for a few years. It is great for managing monthly expenses. Plus, it includes life insurance so your family stays protected if anything happens to you.

Guaranteed Return Savings Plan

With this plan, you get assured returns at key life stages and the remaining amount at maturity. It also gives you life cover and offers flexibility to withdraw your money when needed.

Money-back Savings Plan

In a money-back savings plan, you do not have to wait till the end to get your money. You receive partial payouts every few years during the plan term, and the remaining amount is given at maturity. This helps with ongoing expenses like home repairs, school fees, etc.

Endowment Savings Plan

An endowment savings plan gives you a lump sum at the end of the policy, along with life insurance. Some endowment plans also share company profits with you, adding to your final payout. These plans are simple, long-term, and reliable.

Unit-linked Savings Plan (ULIP)

This is a savings + investment combination. Here, part of your premium goes into market investments (like stocks), and part gives life cover. Returns depend on market performance, but staying invested for the long term helps balance the risks.

Benefits of Opting for a Savings Plan

Now that you know what is savings plan and its types, let us take a look at its benefits to understand the importance of savings:

Protection

A savings plan, as mentioned above, comes with life insurance. Thus, it provides financial protection to your loved ones till the policy lasts. Your dependents get a lump sum payout amount in the case of an unforeseen event.

Retirement Savings

Retirement plans are a great way to build a financial corpus and accumulate retirement funds. They are the safest option and the best long-term investment option that you can opt for. Even with small monthly savings, you can accumulate a good retirement fund for yourself in the long term.

Tax Benefits

Savings plans are entitled to tax deduction under Section 80C of the Income Tax Act. Additionally, the best savings plan will also offer tax-free maturity proceeds. However, this is subject to Section 10 (10D) of the Income Tax Act.

Flexible Returns

Some savings plans let you invest in market-linked funds. That means you have the potential to earn more than fixed interest, depending on the plan you choose and the market performance. You can choose the level of risk you are comfortable with and enjoy the flexibility.

Assured Maturity Benefits

When your savings plan ends (matures), you get a guaranteed lump sum or regular payouts. This gives you financial certainty and peace of mind after years of disciplined saving.

What are Some Best Savings Plans in India?

The finance and insurance market in India is heavily crowded, and you will get multiple options as per your financial goals. However, not all options are excellent choices for everyone. Some options possess high-risk factors, while many others offer prolonged growth. Here are the best savings plans that you must check before investing:

Guaranteed Savings Plan

A guaranteed savings plan is a financial product offered by insurance companies or financial institutions that guarantees a fixed return on investment over a specified period. Investors deposit a certain amount of money into the plan, and in return, they receive guaranteed returns, typically at a predetermined interest rate. These plans provide a secure way to save money while offering peace of mind to investors about the safety of their principal amount.

National Savings Certificate (NSC)

The National Savings Certificate is a government-backed savings instrument available in India. It offers a fixed interest rate and is designed to encourage small savings among individuals. Investors purchase NSCs from post offices or authorized banks for a specified denomination and lock in their investment for a predetermined period, typically five or ten years. The interest earned on NSCs is compounded annually and is eligible for tax benefits under Section 80C of the Income Tax Act.

Recurring Deposit

A Recurring Deposit (RD) is a type of savings account offered by banks and financial institutions that allows investors to deposit a fixed amount of money at regular intervals, typically monthly, for a predetermined period. RDs offer a fixed interest rate and are designed to help investors accumulate savings systematically over time. At the end of the investment period, the investor receives the principal amount along with the accumulated interest.

Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a long-term savings scheme backed by the Indian government. It offers attractive interest rates and tax benefits to investors. Individuals can open a PPF account with authorized banks or post offices and make contributions towards it annually. The invested amount is locked in for a fixed tenure of 15 years, with the option to extend the account in blocks of five years thereafter. Contributions to PPF accounts are eligible for tax deductions under Section 80C , and the interest earned is tax-free.

Senior Citizen Savings Scheme

The Senior Citizen Savings Scheme (SCSS) is a government-sponsored savings scheme targeted at senior citizens aged 60 years and above. It offers a higher interest rate compared to other savings schemes and provides regular income to retirees. Individuals can open an SCSS account with authorized banks or post offices and invest a lump sum amount for a tenure of five years, extendable for another three years. The interest earned is taxable, but is paid out quarterly, providing a source of regular income for senior citizens.

Atal Pension Yojana

The Atal Pension Yojana (APY) is a government-initiated pension scheme aimed at providing financial security to workers in the unorganized sector. Under APY, individuals contribute towards their pension during their working years and receive a guaranteed pension amount upon retirement. The scheme offers fixed pension amounts ranging from ₹1,000 to ₹5,000 per month, depending on the contribution and age of the subscriber. APY contributions are eligible for tax benefits, and the scheme is administered by the Pension Fund Regulatory and Development Authority (PFRDA).

Sukanya Samriddhi Yojana

The Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme targeted at the financial security of the girl child. Parents or guardians can open an SSY account in the name of a girl child aged below 10 years. Contributions to the account can be made until the girl child reaches 15 years of age, and the account matures after 21 years from the date of opening. SSY offers attractive interest rates and tax benefits, making it an effective tool for long-term savings for the education and marriage expenses of the girl child.

Factors to Consider Before Investing in a Savings Plan

You can create a safe financial base for the future and gain several tax benefits by putting your money in a savings plan. However, there are a few things to consider while choosing the optimal savings strategy for you and your family.

Risk Capacity and Profile

You must first determine your risk tolerance to locate and select the optimal savings strategy. The two most crucial factors that might affect how much risk a person can bear are personal preferences and age. Investing options with a high level of risk and a high rate of return are often available to young individuals in their 20s and 30s.

Investment Duration

Another important factor to consider when choosing the best savings strategy is how long the money is invested. Numerous savings programs offer investors a long to medium-term investment horizon and additionally function as tax-efficient investment options. Some of these may help you grow your funds throughout your policy term.

Ultimate Goals

You must be certain of your goals before selecting the most advantageous savings strategy. Knowing your end objective makes it simple to choose options for investments that save on taxes. These goals may include setting aside money for your retirement, your child’s higher education or wedding, or even the construction of a home.

Savings Plan Highlights

Different savings strategies have unique advantages. The best investment plans for minimizing taxes allow you to take a partial withdrawal over time by forgoing a piece of the policy while keeping the other half with additional perks. However, some savings programs have a defined term that might be anywhere between 5 and 10 years or even 30 to 35 years.

Flexibility of a Savings Plan

To achieve all of your long-term objectives, you must pick an adaptable savings strategy. You can take care of your unanticipated short-term needs by doing this. They provide you with much more leeway to renounce the policy if the situation demands it.

Final Words

So, what is savings insurance plan really? Savings plan definition says “It is a financial product and a habit that helps you prepare for life’s big moments without worry. From protecting your family to building a secure retirement, savings plans make your future brighter, one small step at a time.

By implementing a systematic approach to saving, budgeting, and investing, individuals can take control of their finances, build wealth over time, and ultimately enjoy greater financial freedom and peace of mind. Just remember that the earlier you begin, the more you benefit!

FAQs on What is a Savings Plans?

How do I create a savings plan?

To create a savings plan, start by identifying your financial goals, assessing your income and expenses, and determining how much you can afford to save each month. Choose appropriate saving options based on your goals, risk tolerance, and set up automatic contributions to your savings account or investment account.

What types of financial goals can I achieve with a savings plan?

A savings plan can help you achieve a wide range of financial goals, including building an emergency fund, saving for a down payment on a home, funding education expenses, planning for retirement, or saving for a vacation or other major purchases.

How much should I save each month?

The amount you should save each month depends on your financial goals, income level, and expenses. As a general rule, aim to save at least 10-20% of your income, but adjust this amount based on your individual circumstances and priorities.

Can I adjust my savings plan over time?

Yes, you can and should adjust your savings plan as needed to accommodate changes in your financial circumstances, goals, or market conditions. Regularly review your plan, monitor your progress, and make adjustments as necessary to stay on track towards achieving your financial aspirations.