Factors You Should Consider Before Buying a Savings Plan

ByDilip Singh

To live a stress-free life and to deal with uncertainties, it is crucial to do proper financial planning. The best way to ensure a financially secured future is to start saving regularly from a young age. A savings plan is a great way to start your savings journey.

However, there are some factors which should be considered before you get one.

What to Consider While Buying a Savings Plan?

  • Risk Profile: It is important to know your risk appetite before you choose a plan for savings. Personal factors such as age are important elements to understand the amount of risk you can take.

Usually, people in their 20s and early 30s can take higher risks that can fetch profitable returns. They can opt for investment plans which are aggressive – those which invest your money more in the equity assets of the stock market and lesser in debt. An example of that would be ULIP. It is more suitable for youngsters who are willing and able to take more risks as they have more time to correct and overcome losses.

  • Tenure of the Investment: Insurance plans provide a mid-to-long-term investment horizon in addition to giving you tax benefits. The insured person can start with a small premium amount and build it up over the policy term. This is possible as most insurers understand the volatile nature of earnings and savings depending on the age of the person. It also provides provisions where the premium amount can be decreased or increased as per the person’s suitability.
  • End Goals: You should be clear about the purpose of selecting a savings plan. The final goals help in deciding tax saving options. Your goals can range from accumulating a corpus for retirement or having enough money for a child’s higher education or marriage to building a home.
  • Features of the plan: Different policies have different features. The best tax saving options allow one to make partial withdrawals by surrendering a certain part of the policy while retaining other benefits. Some plans have a fixed cover ranging from 5-10 years to 30-35 years depending on what you want. Others offer coverage for entire life. With all-inclusive coverage and flexible options, you can enjoy safety as well as grow your savings. Some policies also provide bonuses, the amount of which is determined by the insurers based on the performance of their assets in the market.
  • Flexibility of the Plan: For long-term horizons, this policy lets you take care of unpredicted short-term requirements. They offer the flexibility of yielding the plan if the situation demands it. Nevertheless, it is better to go with the tax saving plan for longer term so that they give lucrative returns.
  • Charges: Knowing the costs and charges involved is important while selecting the best savings plan in India. These plans have minimum charges and offer flexibility when it comes to cash withdrawal, bonus receipt and tenure of the plan. Moreover, the long-term impact of these charges is much less and makes a saving plan a great way to increase wealth at a low cost.

The above factors will help you buy the best savings plan in India. Make sure you read all the documents before buying.