Whether it is to manage your future lifestyle expenses, or spend your retirement life, savings are the backbone of a financially secure future. But generating a corpus is not that easy especially when you don’t have strong saving habits.
That’s where the best saving plans come in. Saving plans work by helping you develop systematic saving habits through regular investments. Additionally, saving plans build your savings faster as they also provide you returns and interest.
Image Source: Shutterstock
Investing in the best saving plans is any day better than relying on traditional savings method. So, if you are planning to, here are all the tips you need.
- Know Your ‘Why’
Knowing why you are saving for is essential before you actually start saving. Knowing your savings can help you calculate how much you have to save. At the same time, it can help you stay motivated to meet your saving goals.
So, the question here is for you, why do you want to save? Is it for a particular category of expense? Or are you saving for long-term needs?
Answer yourself and define your ‘Why’ to find the suitable saving plan for your requirements.
- Understand Your Risk Appetite
Different saving plans provide different returns. While some saving plans such as Public Provident Fund (PPF) and Fixed Deposits (FD) are much safer, savings cum investment plans such as Unit Linked Investment Plans (ULIPs) are riskier. If you don’t know what is ULIP, it is an insurance cum investment product.
These saving plans offer you returns in form of market returns. In other words, the returns are not guaranteed and depend on market fluctuations. However, even though they are riskier, they can also offer high returns.
Ergo, it’s essential to determine your risk appetite and invest accordingly.
Risk appetite can depend on your age; risk appetites usually diminish as you age. However, risk appetite also depends on your income and financial capabilities.
- Consider Liquidity
Liquidity is a fund’s capability of getting converted into cash. Liquidity is an important factor as you wouldn’t want to struggle withdrawing funds accumulated through saving plan.
For instance, some saving plans come with a lock-in period of 5-6 years. This means you cannot withdraw your money before that.
That said, choosing saving plans that provide moderate liquidity would be a wise choice. Opting for highly liquid saving plans can disrupt your savings.
- Know How Different Saving Plan Work
It’s imperative to understand how saving plans work before you buy one. This includes knowing details such as policy term, death benefit, and terms and conditions.
At the same time, some features such as premium protection, death benefit and accidental/ disability benefit should be well understood.
Premium protection is a feature of the best saving plans in India that ensures premium payments continue even after your untimely demise. Paying premiums for the complete policy term ensures that your family gets the promised sum assured.
Death benefit is once again a feature that is provided by the best saving plans. It ensures that your family gets the money you have saved through a saving plan in the event of your unfortunate death.
Disability benefit is another feature that waives premium in case of disability owing to an accident or illness.
- Speculate Returns According to Interest Rates
The best saving plans in India can help grow your wealth by providing you interest on your investments. Different saving plans provide different rate of interest. That said, savings can grow multifold if the interest rate is high.
Ergo, before choosing the best saving plans, calculate the return on the basis of your investment and interest rate of the saving plan. Feel free to use a saving calculator to make your work easy.
Here is a list of the best saving plans you can invest in, and their rate of interest.
|Savings Scheme||Interest Rate as of Jan 2022 (%)|
|National Savings Certificate (NSC)||6.8|
|Public Provident Fund||7.1|
|Sukanya Samridhhi Yojana||7.6|
|Kisan Vikas Patra||6.9|
|Senior Citizen Savings Scheme||7.4|
|Post Office Savings Account||4|
The interest rates for these best saving plans are finalized and reviewed by banks, financial institutions, and the government every year.
Saving schemes are a great option as they help you build a corpus and meet your financial goals or any contingency. Now that you have all the tips, we hope you invest in the best saving schemes.