In India, saving money is an essential habit that most of us learn from our parents at a young age. As you grow older, you realise its importance in helping you accomplish your short-term and long-term financial goal. However, just as it is vital to save, it is critical to save adequately.
Gone are the days when savings meant keeping aside a part of the income for later use or parking the surplus funds in a bank savings account. Today, the concept of savings has evolved significantly. You can purchase a savings plan and allow your money to grow over time so that you keep up with the rising prices and inflation.
There are many savings plans in the market, and choosing the right one can be overwhelming, especially if you have no prior experience. So, to help you choose the right savings plan, we list a few critical factors you must consider.
Savings goal
Before you choose to invest in a specific savings plan that you believe is the best, you must be 100% sure of your goal or purpose of savings. When you have a fixed goal, you can save accordingly and be on track to achieve the goal. The goal can be anything from creating a corpus for retirement purposes, accumulating funds for a child’s future needs like education and marriage, or buying a new home.
Know about the investment duration
Another vital factor to consider while choosing the right savings plan is the investment duration or the period for which the money is invested. Many savings plans in the market allow you to save for long-term and short-term goals.
You can choose a plan that allows you to save a small amount periodically and build a corpus over time. You can also decide the investment duration based on your goals and look for a savings plan accordingly.
Liquidity
The savings plan you purchase must give you enough liquidity as per your needs. You must ensure that the plan allows you to withdraw funds during an emergency. You must get the funds when needed to ensure the whole purpose of investment is recovered.
Understand the tax benefits
When you invest in any savings plan, you must be aware of the tax benefits associated with it. Different financial instruments like life insurance policies and assured savings plans offer tax benefits under various sections of the Indian Income Tax. So, choosing a tax-efficient savings plan is better for reducing your overall annual tax liability.
Consider the inflation
Before you make your final decision to purchase a savings plan, you must keep in mind the inflation factor. If the inflation is lower than the returns offered by the savings plan, you can go ahead and start investing immediately. If the inflation rate is higher than the rate of return, you would have any actual wealth growth or capital accumulation.
Terms and conditions
Before you sign any papers while buying a savings plan, make sure that you are aware of all the terms and conditions to avoid any unnecessary hassles in the long run. If you have any doubts, make sure to get complete clarity about all the terms before you put your hard-earned money into the plan.
Do your research about different savings plans, and choose the right plan that suits your investment goals.
Final Word
Now that you know the critical factors to consider while choosing a savings plan, do your due diligence, and make the right choice. Happy Savings!
