Savings plan: Why do you need it?

One of the earliest questions that we all have is why do we need a savings plan? And, the attempt to answer that question is pretty obvious. However, the reasons for savings may differ from person to person. And, before you commence savings, it is vital that you figure out your financial goals as these goals are what will keep you at it.

In this article, we, attempt to give you some insights into a savings plan which might motivate you to save in a disciplined manner. But, before you dive into the topic, let us first understand what a savings plan is.

Savings plan: This plan is predominantly a type of life insurance investment plan which offers a plethora of possibilities not just to save money but also invest in building a financial corpus in a systematic and disciplined manner.

Some of the best savings plans allow you to be prepared to meet your family’s future financial needs and lets you fulfil financial goals. Here are some of the features which offer a savings plan which makes it a lucrative way to save money.

Life Cover and Riders:

Savings plans such as unit-linked investment plans aka ULIPs come with a dual benefit of life insurance cover and market-linked savings returns. This makes savings plan a preferred savings investment option. They also offer additional riders which help to enhance the plan further. These riders prove to be beneficial when it comes to accidental death, critical illness, and permanent disability.

Investment Options:

Some savings plans also facilitate a plethora of options when it comes to investing in financial instruments. Right from equities which generally involve a reasonably high risk to traditional instruments such as fixed interest securities, savings plan offers it all to you. The fixed interest securities can be government securities, corporate bonds, and various money market instruments.

Tax Benefits:

Another feature cum benefit of savings plan is that it makes for right tax-saving instruments. So, the monthly premium paid towards most life insurance savings plans is deductible from taxable income. A maximum limit of Rs. 1 Lakh can be deducted under section 80c of the Indian Income Tax Act, 1961. Additionally, maturity benefits and death benefits offered by savings plan are also eligible for tax exemption under section 10D of the Indian Income Tax Act, 1961. This makes them one of the best saving scheme making them the choicest tax saving instrument.

On a final note:

Today, the market offers you tons of savings plans, and some of them come with its risks and benefits. So, with varying returns and saving, ad hoc savings is not enough. Hence, before you buy a savings plan or invest in one, it is crucial that you do thorough research on it.