Savings Plan

By the age of 25 years, you must try to save up to 25% per cent^[1] of your gross income (before taxes and deductions). For example, if you are earning Rs. 5 lakh per annum by the age of 25, you must save up to Rs. 1.25 lakh in savings each year, which can be used to invest in different savings plans based on your preferences and requirements.

Ideally, an average person must try to save as much as their age. In other words, individuals must save the same percentage of their gross annual income as their age – a 25-year-old working professional must save at least 25% of his or her yearly salary, while a 40-year-old must save at least 40% of his or her income.

As your age increases, you must work towards increasing your savings, so that you have adequate financial backup to support your life goals and suffice your life after retirement.

As a working professional, it is crucial that you balance your savings and investments. At the same time, you may choose to invest in a savings plan that offers both insurance cover and market-linked returns on investments or guaranteed return. At the same time, you must have enough savings to manage any emergencies and pay for short-term goals.

Ideally, you must have between three to 12 months of income as savings before you venture out to invest in higher-risk financial instruments.

You can choose from the different savings Insurance plans available by comparing their features, benefits, year-on-year returns, and your financial risk appetite. Accordingly, you can select the best savings plan that aligns with your goals and premium payment capabilities.

You must keep the following points in mind while choosing the best saving plan for your family

a. Segregate your goals into short-term and long-term

b. Determine your total spending and savings (after considering all exiting expenses and debts)

c. Review and compare different savings plans available online

d. Choose a savings plan that offers maximal life insurance protection in term of lumpsum Sum Assured

e. Review the year-on-year performance of the savings plan to determine how returns are accrued on the same

Savings plans are mostly financial instruments that help you secure your long-term and short-term goals financially. You invest a certain amount towards a savings plan, which is then allocated into different money-market instruments to earn returns and grow your savings corpus.

Savings and income insurance plans from Max Life Insurance are life insurance products that provide opportunities to grow your savings through market-linked returns while protecting your loved ones against life’s uncertainties with insurance protection.

Savings and income plans offer significant tax saving benefits⁴ under Section 80C of the Income Tax Act 1961. Accordingly, the premium amount that you pay towards the saving plan is eligible for deduction from your total taxable income, up to Rs. 1.5 lakh.

In other words, you can reduce your total taxable salary by up to Rs 1.5 lakh that you invest as premium towards a savings plan.

Purchasing a savings plan is the right decision for you if you are a:

a. Young investor

b. Recently married

c. Young parent with children

d. Nearing retirement

Here is how you can start on your journey of long term financial security with a savings plan:

a. Review and compare the features and benefits of different savings Insurance plans available online

b. Opt for the maximum policy tenure and policy benefits based on your requirements

c. Set up automatic premium payments using the ECS (Electronic Clearing Service)

d. Establish savings buckets depending upon your goals and investment tenures

Partial withdrawal is the feature offered in some savings schemes, where the investor can encash/withdraw any part of the fund during the policy term. This feature is available as policy terms and conditions.

Long-term investments allow you to expand your portfolio and achieve your objectives over several years. Short-term investments are intended for goals with shorter timelines, giving the investor access to the funds sooner. You can choose the savings scheme with a duration, depending on the timeline of expected returns.

If you are looking for savings scheme that can help you with immediate financial challenges, going for short-term plans can be helpful. Although, short-term savings schemes normally provide return over time, they are highly liquid investments that allow investors to make money rapidly if needed.

Some of the best saving schemes in India are the Personal Provident Fund(PPF), Senior Citizen Savings Scheme, National Savings Certificate, etc.

The above mentioned name of generic saving plans and saving life insurance plan are assumed examples.