One of the simplest financial management skills that everyone should learn, is to build your savings and channelize them. As soon as you begin earning, it is imperative to set financial goals and start saving towards them. It will help you make the most of your money, prepare for emergencies, and make financial progress in life.
One of the best options is to invest in a savings investment plan. A savings investment plan is a financial instrument that helps create wealth for your future. It offers a rate of interest and lifelong coverage, just like insurance.
Sometimes savings plans have additional benefits like life insurance and capital accumulation. However, choosing a savings investment plan that offers a good return on investment, matches your risk appetite, and fulfils your financial objective is tricky.
The best savings plan may be different for everyone, because everyone has a different reason to save. Here are six factors to keep in mind when researching for a savings investment plan –
Your Savings Goals
The first and foremost factor to consider for your savings investment plan is your savings goal. Everyone has some objectives for saving money.
It could be higher education, marriage, buying a home, or saving for retirement. Choose a plan that aligns with your goals. Think about your long-term and short-term goals vis-à-vis the tenure of the plan.
Risk Profile & Tolerance
Young people at the beginning of their careers can afford to invest in high-risk, high-return financial instruments. Their risk appetite is higher and they are eager to reap the rewards of their investment.
On the other hand, those nearing the age for retirement might have a lower tolerance for risk. They would prefer to invest in a savings plan that offers a decent return at minimum risk.
The duration or tenure of investment is an essential factor to consider when choosing a savings investment plan. Numerous savings plans offer long to medium-term investment horizons, while giving some tax-saving benefits. You can also check if your savings investment plan allows you to increase your funds in the course of your policy.
Your financial goals define the timeline of the investments that suit you. Sometimes long-term investments are essential for tax savings, in other scenarios short-term investments offer better opportunities to fulfil small financial goals.
Understanding the reason for your investment will help you set the right financial goals and enable you to find the savings investment plan that works for you.
Flexibility of Plan
Examine the flexibility offered by your savings investment plan. Flexibility refers to the ease with which the invested amount can be withdrawn of liquidated at short-term intervals.
A flexible savings policy ensure short-term financial security, offers tax-saving benefits, and liquidity. Read the fine print to ensure that your savings plan allows you to access your money when you need it.
Some of the best savings’ plans are those that offer tax benefits to their investors. Find out if the premiums for the savings plan are exempted from taxes under 80C or 80D. Tax benefits will help you save more money, in addition to the amount you save.
Savings and investment are an essential part of building wealth, but well-thought-out financial decisions will help you make the most of your money.
A good savings plan will check all the boxes mentioned above and fulfil more than one of your financial objectives. Define your financial goals before looking around for investment opportunities or savings plans. It will help you choose the best savings plans that aligns with your long-term and short-term financial goals.
Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She’s been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, a digital savings account app that offers a 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on, Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.