Benefits of Long-Term Savings Plans

Life’s uncertainties make individuals prioritise future planning to achieve financial stability for a comfortable living. This blog focuses on discussing the importance of investing in the right Savings Plans early to achieve your long-term financial goals effortlessly.

Whether you want to save money to fund your child’s higher education after eight to ten years or build a significant retirement fund to enjoy your golden years after a decade, investing in the right long-term savings options can help you fulfil all your desires.

Understanding Long-Term Savings Plans

Definition and Purpose

A long-term Savings Plan is a financial product designed to help people with systematic wealth accumulation over an extended period. These plans are available in various forms, such as government-backed instruments, market-linked investment plans, Life Insurance plans with savings components, etc.

Their primary purpose is to develop financial discipline through consistent savings while providing capital appreciation benefits or guaranteed returns over time.

Core Advantages

Including long-term Savings Plans in your investment strategy can have numerous advantages. The biggest advantage is enjoying the benefits of compounding interest. It’s a principle wherein your earned interest on investments is reinvested over time for additional returns, generating considerable money.

If you remain consistent with your investments, it can develop strong financial discipline for long-term economic well-being. You can also enjoy tax advantages by deducting eligible investments from gross total income for reduced taxable income and liability.

Benefits of Long-Term Savings Plans

Building Wealth Over Time

If one of your biggest long-term financial goals is significant wealth accumulation, you must start investing early in the right Savings Plans. The extended investment period lets your capital grow over time using the power of compounding interest. It also balances the impact of short-term market volatility, facilitating gradual fund accumulation to meet diverse goals.

You can explore the Shriram Life New Shri Vidya Plan (UIN: 128N051V03) if you’re looking for a low-risk Savings Plan to secure your child’s future. This Savings Plan combines the benefits of the best Child Plans, allowing you to enjoy dual benefits.

Besides supporting long-term savings creation, this plan also provides regular money-backs and additional bonuses for better returns.

Security for Retirement

Many individuals include long-term savings and Investment Plans in their retirement planning because they help build a large enough fund to support the desired lifestyle during retirement.

While the National Pension System (NPS), regular pension funds, annuity plans, etc., are common options to achieve financial stability in retirement, you can also explore more rewarding options, such as the Shriram Life Early Cash Plan (UIN: 128N093V02).

This non-linked participating plan combines multiple benefits of Savings, Child, and Retirement Plans. Besides providing a capital guarantee, it also gives a cash bonus guarantee, compounding interest benefits, life cover, guaranteed income from 1st policy anniversary, and more, creating strong financial stability for golden years.

Tax Efficiency

Including the right Savings Plans in your investment strategy can earn you immediate economic benefits through tax advantages. You can deduct eligible investments u/s 80C and other relevant sections to lower your taxable income and overall tax liability.

Maturity proceeds from particular plans, such as the Shriram Life Assured Savings Plan (UIN 128N089V04) can also get you tax benefits u/s 10(10D). If you’re overwhelmed with the tax-saving sections and guidelines, consider consulting a reliable tax professional for personalised guidance.

The Power of Compounding Interest

How Compounding Works

Compounding interest is a powerful financial principle wherein the returns earned on your investment is reinvested to generate their own earnings. Unlike simple interest, which calculates returns on the principal amount, compounding lets interest accumulate on both the initial investment and the interest already earned.

It leads to significant wealth accumulation over time. You can benefit more from compounding interest when investing in long-term savings options because the extended period provides adequate time for the interest to be reinvested for significant earnings.

Maximising Compounding Benefits

The easiest way to maximise compounding benefits is to start early. It lets the invested amount grow steadily over a period, earning substantial returns. Even small amounts invested consistently for an extended period can give significant results.

If you have adequate income to maintain your lifestyle expenses, consider reinvesting the returns for optimal compounding benefits.

Developing a Long-Term Savings Strategy

Setting Clear Financial Goals

Thoughtful future planning is built on SMART financial goals, i.e., goals that are specific, measurable, achievable, relevant, and time- bound. These goals can be used as a roadmap to remain focused and disciplined over extended periods to achieve the desired economic aspirations.

If you don’t have any clearly defined financial goals, start by identifying how much amount you’ll need after a particular period to achieve a specific desire, such as funding a child’s higher education, buying a house, saving enough for retirement, etc.

Then, adjust the amount according to standard inflation for the set timeframe to get a reasonable figure. Consult a professional financial expert for personalised guidance if you’re feeling overwhelmed.

Consistent Contributions

Consistent contributions are one of the most crucial steps in achieving financial stability with long-term savings, investment, or Protection Plans. It’s especially true for Life Insurance plans with savings elements because consistent payments will keep the policy active, so you can enjoy its maturity benefits without hassle.

Consistent contributions in other investments will benefit you through the power of compounding interest, so remain disciplined with your contributions.

Conclusion

Long-term Savings Plans aren’t ordinary financial instruments but a way to achieve financial stability in the future. Since the market provides different types of Savings Plans, you can choose the right option based on your specific financial goals to fulfil them in the desired time horizon.

If you’re searching for the best long-term Savings Plans or Investment Plans for wealth accumulation or another goal, explore the wide range of options available at Shriram Life Insurance.

We’re one of India’s leading and most trusted insurers, providing a diverse range of Life Insurance plans, such as Savings Plans, Protection Plans, Retirement Plans, etc., to help people achieve their particular financial goals.