In these uncertain economic times, how much more important is it to have a well-sewn and sound financial plan? Whether you are saving for your child to go to college, buying a house, or merely planning for a financially stable retirement, it all begins with smart saving. The challenge for most individuals is selecting the appropriate plan, a plan not only to cover their money but also to make it larger and better. This is where a savings plan that is also a money saving plan can make the difference.
This blog tells you how to determine and select a money-saving plan with double benefits: it preserves liquidity and creates long-term wealth. With appropriate matching of your savings objectives to the proper financial tools, you can realise the true potential of your income.
Understanding the Basics: Money Saving Plan vs. Savings Plan
Firstly, these two words are most likely to be considered synonymous. But there are subtle distinctions:
- A savings plan is essentially a self-control plan or financial product that allows you to build up money over time. It could or could not have investment elements.
- A savings plan, especially when offered by financial organisations or insurance agencies, typically has both an investment element and a protection element.
To select a hybrid plan meeting both ends, you must contrast plans that combine traditional ways of saving with wealth-building facilities.
Why Select a Dual-Benefit Plan?
This is why combining both is vital:
- Financial Safety and Growth: A well-selected plan protects your funds while deriving frequent returns.
- Emergency Preparedness: Liquidity is necessary during emergencies; your plan must accommodate partial withdrawals or loans.
- Goal-Based Planning: Regardless of whether it is a child’s education, retirement, or buying property, a two-benefit plan can be customized to achieve such objectives.
- Tax Efficiency: Hybrid savings schemes are tax-assured under provisions such as section 80C and 10(10D) of the Indian Income Tax Act.
Key Features to Look For
For choosing a plan that caters to saving as well as money appreciation needs, ensure it includes the following aspects:
Guaranteed Return Investment Options: Choose a plan that offers guaranteed returns but also provides an opportunity to invest in products based on the market. For example, endowment or Unit Linked Insurance Plans (ULIPs) offer insurance coverage along with savings in one package.
Flexibility in Premium Payments: Flexible payment of premiums gives you the management over your finances. A single, limited, or regular premium payment option can be chosen depending on the cash inflow available.
Liquidity Options: A sound savings plan must permit part withdrawal or a loan against the policy. Thus, during times of need, your money is not tied up at all.
Tax Benefits: Select a plan that provides deductions under certain sections of the Income Tax Act. ULIPs, Public Provident Fund (PPF), and National Savings Certificates (NSC) are good tax-saving schemes.
Low Risk with Moderate Returns: If you possess a low-risk profile, select plans with assured returns, even though the returns are not much. Government-assured schemes such as Sukanya Samriddhi Yojana (SSY) and PPF are good options.
Well-Liked Plans That Serve Both Purposes
Let’s take a few saving plans as well as investment plans, which are good in both capacities:
1. Public Provident Fund (PPF)
PPF is a long-term government-backed savings plan with tax-exempt returns. It is a 15-year plan with compounding interest and is a fine tool for prudent saving and wealth generation.
2. Unit Linked Insurance Plans (ULIPs)
ULIPs are a combination of investment and life insurance. A portion of your premium is invested in equity or debt funds, while the remaining amount is used to fund your insurance. Over time, the hybrid approach provides the highest returns with security.
3. Endowment Plans
These are conventional insurance-cum-saving schemes that give lump sum returns after a tenure or on demise. They’re perfect for conservative investors who seek assured maturity returns.
4. Recurring Deposits (RDs)
R.D.s are fixed deposit schemes in which you pay a fixed sum of money every month. Although the returns are meagre, the habit of regular saving makes it a good money-saving scheme.
5. Systematic Investment Plans (SIPs) in Mutual Funds
Though not a savings scheme per se, SIPs assist in creating a corpus by investing small amounts of money regularly in mutual funds. They are apt for long-term aims and are comfortable with higher inflation-adjusted returns.
Things to Keep in Mind Before You Select Your Plan
For you to make the correct choice, keep the following in mind:
- Your Financial Goals: Define what you are saving for. Are you saving for emergency funds, short-term, or long-term goals such as retirement or education?
- Risk Appetite: Do you prefer the riskiness of the markets? If risk-averse, invest in government or fixed-income funds. If you can afford to take on a bit more risk, try out ULIPs and mutual funds.
- Time Horizon: How long you can keep your money invested makes a significant difference to the returns. Compounding helps when it is for long-term objectives.
- Access and Flexibility: Select a plan that enables you to take your money at a time of your choice or one that lets you shift the investment pattern (for ULIPs).
- Provider Credibility: Select well-reputed banks, NBFCs, or insurers with sound credibility ratings and world-class customer service. This way, your money is in safe hands.
Expert Tip: How to Strategically Use Plans
Instead of keeping all your eggs in a single basket, you can strategically create several instruments:
- Open a PPF account for long-term tax-free returns.
- Invest in a ULIP for life cover along with equity exposure.
- Keep a Recurring Deposit for generating an emergency fund.
- Utilize SIPs in mutual funds for generating wealth.
- This combination renders your investment portfolio diverse, well-declared, balanced, and appropriate for savings as well as investment purposes.
Conclusion
A carefully selected savings plan that also acts as a money saver does more than place your money in a safe place; it creates a secure, successful future for you. With the best combination of attributes guaranteed gains, liquidity, flexibility, and tax advantages, you can make your money last forever.
Keep in mind that there is no single solution that fits all. The best plan will be the one that best meets your goals, lifestyle, and risk tolerance. Use a professional financial advisor if necessary, and take the first step to financial independence today.
With an intelligent approach to saving and investing, your money can work as hard for you as you do.
