Wealth accumulation and financial security are goals that most working individuals actively strive towards. Hence, while in the pursuit of saving for themselves and their loved ones, one has to consider which saving schemes are the best suited and most beneficial to their immediate financial goals. The matrix of pros and cons for each can only be validated when the person making the choice is well-prepared to understand the saving options they may have access to.
As one can gauge from the word itself, the act of taking a sum of money and consciously setting it aside for future purposes or as an emergency fund is called saving. One can keep adding to this corpus, where monthly they may save a chunk of their earnings and set it aside for an impending expense they might have visibility for. It can be for personal goals or short-term expenses such as travel, property maintenance, or even unforeseen emergencies, etc.
Savings can be set in savings accounts or fixed deposit accounts in bank saving schemes among a host of other types of investments available as well.
Although the various types of life insurance plans are also a popular choice for many, saving schemes in India have the supplementary benefit of being backed by the government. A step towards incentivizing public sector bank investments and financial literacy, saving schemes are a useful method of saving for one’s future in a secure and regulated space.
A potential investor or someone looking to save their funds for later will always benefit from a tangible financial roadmap at the beginning of their savings or investment decisions. Since there is an abundance of saving schemes available today, one should do thorough research when looking for the option that serves their purposes better.
Let us look at some of the most trusted saving schemes in India:
1. Public Provident Fund
In the Indian investment market, Public Provident Fund is one of the most simplified and affordable savings schemes in India as it starts at the base deposit of Rs 500 and can offer returns calculated in compound interest rates. A Public Provident Fund account can be opened in a bank or a post office, and because it is backed by the government; it has the added benefit of being tax-free.
The high-return rate is balanced against the long lock-in period of 15 years, where the account-holder is only allowed to access the funds after a 6-year period or take a loan against the existing account balance.
2. Fixed Deposits
As the name suggests, a bank fixed deposit is the practice of making recurring investments in a fixed deposit and letting the amount cumulate with an interest rate. The account holder is not allowed to access the funds in the fixed deposit for the tenure selected, which ranges from 7 days to 10 years.
It is one of the most low-risk and economic saving scheme options yielding a high-return investment where on maturity the account holder receives the funds accumulated which is supplemented by the interest rates offered by the bank. It is also beneficial for senior citizens, as the interest rates for them are higher, and it is free from market fluctuations.
3. Mutual Funds:
In the list of savings schemes in India, mutual funds are one of the most bankable market-dependant investment alternatives as they allow the management and investment of one’s funds by an equity fund manager on their behalf.
The invested funds are then used to purchase capital assets such as equity, stocks, and bonds as determined by the market trends of the time.
Also, read: How To Save Money For The Big Goals – Thank You Dad For Teaching Me The Secrets!
The two major types of mutual fund investment options are:
- Equity Mutual Fund
This particular type of mutual fund scheme is one that promises a high return on investment by investing in equity stocks and instruments yielding a high-return at a manageable risk margin.
- Debt Mutual Fund
Under this type of mutual fund, the investment is made in government securities, treasury bills, corporate bonds which are also known as fixed-interest securities. These funds promise a steady return on investment over an extended period of time.
- Equity Linked Savings Scheme (ELSS)
Most mutual funds are not tax-free because they are market-linked, however Equity Linked Saving Schemes are the only kind of mutual fund exempt from deduction, under section 80C of the Income Tax Act, 1961. It is a supplementary benefit, making it one of the few market-linked tax-free savings schemes in India.
4. ULIP (Unit Linked Insurance Plan):
It is an investment-cum-insurance instrument that is driven towards fulfilling a dual purpose for the policyholder. ULIP plans are maintained by premiums paid by investors, the frequency of these payments can be monthly or annual. The basic feature of a ULIP plan is that it uses the paid premium and allocates a part of it towards investments and the rest towards life insurance coverage.
India has a very dynamic income and investment market, one that is built to cater to customizable needs and financial obligations. Savings schemes are one of the most fundamental ways of building one’s corpus for future use. Max Life Insurance and its range of savings schemes and plans can help you find saving solutions that can cater to your growth needs and financial goals in the long run. Get in touch today to look through the wide range of saving plans offered by Max Life Insurance and rest assured of a secure future.