What is a Savings Plan and What are is Benefits?

Since the early days of our teen life, we are taught not to waste but rather save money. Similarly, the first financial habit inculcated in us is to save whatever money we get, be it through piggy banks, coin collection, or in some other way. We are taught this with a promise that once we collect a big sum, we can buy something more meaningful and valuable to use. This concept of taking out a portion today and saving it to enjoy tomorrow is related to almost every goal that we have in our lifetime. The habit grows as we grow and embark on our professional journey. In fact, most people consider savings plans as one of the best investment options in India.

In this article, we will discuss what is a savings plan, the benefits of savings plan, the best investment plan for tax benefits, tips related to financial planning for salaried employees and strategies for tax savings, among other aspects related to a savings plan.

What is a Savings Plan?

A savings plan is a form of life insurance plan that offers a chance to the policyholders to save, invest, and grow their funds over time. These investment plans are designed to help an individual develop a regular savings habit. Additionally, the policyholder also gets to enjoy the benefit of decent returns post maturity and when they withdraw the funds.

As savings plans are a high-demand financial product, they come in a wide variety. Therefore, choosing the right savings plans for yourself might sound a little tricky. However, if you analyze your goals and make a checklist to mark all your requirements from a savings plan, it becomes really easy for you. Here are some important points that you must consider while looking for a savings plan for yourself:

- Define your financial goal

- Define the goal’s time (Long term or short term)

- Ensure that the saving policy has flexible features

- Ensure that the plan offers insurance coverage and a good investment opportunity

- Make sure the policy caters to your financial requirements

- Do a proper risk analysis

- Analyse the tax and maturity benefits

In addition to these, you must also look for the add-on riders associated with a savings plan to take maximum advantage of the money you are investing.

Benefits of Savings Plan

A savings plan comes with a lot of benefits. The abundant availability of savings plans in the market has made the competition tough for the service provider banks and Non-Banking Finance Companies (NBFCs). However, this turns out to be useful for the people looking to invest as they get more benefits. Let’s have a look at the benefits that a savings plan may offer and those that one must look out for before investing:

Insurance coverage & payout

As we mentioned earlier, a savings plan is a form of life insurance plan, so it must offer financial coverage to the nominee in case of the policyholder’s unfortunate demise. The coverage is an additional benefit that you receive other than the payout. This provides additional financial support to your loved ones in your absence.

Develops financial discipline

Once you start investing in a savings plan, you gradually develop a habit of saving money. This is a key factor that supports the accumulation of wealth over time. Once you inculcate the wealth creation habits, you will be able to meet your financial goals easily and achieve financial stability.

Flexibility

Everyone has different goals, priorities, and desires, and thus their requirements from an investment plan will also vary. The savings plans that are offered take these goals and desires into account and offer flexible investment options and benefits based on your financial goal. The ability to offer tailored options to each individual makes savings plan a unique investment option.

Tax Benefits

When investing in a savings plan, you are eligible for a tax exemption of up to ₹1.5 lacs on your premium payment under Section 80C of the Income Tax Act.

Best Savings Plan to Choose From

Some of the best savings plan to choose from are as follows:

- GSP (Guaranteed Savings Plan)

- RD (Recurring Deposits)

- ULIP (Unit-Linked Insurance Plans)

- PPF (Public Provident Fund)

- NSC (National Savings Certificate)

Final Words

You know the best part about savings and wealth creation is that the sooner you start, the better and more you gain. The size of your investment is secondary because the most important factor is your habit and discipline of investment. So, if you are looking to invest your money, the right time to start investing in a savings scheme is now.