How to Choose Savings Plan for your Needs

The Indian financial market provides numerous investment options to achieve short-term and long-term financial goals. This blog shares practical tips to help people choose the right Investment Plan without getting overwhelmed or confused. 

Choosing the right investment or Savings Plans is crucial because it ensures all your short and long-term financial goals are met efficiently and securely. When you align your investment choices with your desired time horizon, risk tolerance, investment objective, etc., you effortlessly maximise returns while managing risk.     

Understanding Your Financial Goals

Short-Term Vs. Long-Term Goals

You should clearly distinguish between your short-term and long-term goals before making investment choices because each requires a different strategy and financial product. Short-term goals generally cover financial objectives people aim to achieve within one to five years, such as planning for a vacation, building an emergency fund, saving for a wedding, etc. 

Since these goals require money in a relatively shorter timeframe, investing in saving instruments with high liquidity and capital safety is ideal. Short-term fixed deposits, recurring deposits, etc., are better investment choices for short-term goals. 

On the other hand, long-term goals have a time horizon exceeding five years and include saving for a child’s higher education, buying a house, building a retirement fund, etc. The longer duration enables people to benefit from the power of compounding and balance the risk from market volatility. 

If you’re investing to fulfil long-term goals, your ideal investment choices can be market-linked plans, such as Shriram Life Golden Jubilee Plan (UIN 128L095V01). This plan provides dual benefits of investment and Protection Plans. It also provides a partial withdrawal facility, switching between funds, tax benefits, and more. 

Setting Clear Objectives

You can only find the suitable Savings Plan for your needs with clear objectives. If you’re still unsure about your goals, assess your current financial situation, risk profile, and desired returns within a defined time horizon. These details will help you make the right investment choices. 

Evaluating Different Savings Plan Options

Traditional Savings Accounts

These are the most common financial products in India. They provide a safe place to save money while giving easy access to funds and liquidity. While these accounts are ideal for people with a low-risk tolerance because of capital preservation, security, and high liquidity, their biggest drawback is low interest rates. 

They may not be the suitable choice if your financial strategy prioritises long-term wealth accumulation. 

Life Insurance Savings Plans

These hybrid financial products combine life insurance coverage with systematic wealth accumulation. You can include these plans in your financial strategy if you want guaranteed returns after a particular period. 

The Shriram Life Assured Income Plan (UIN: 128N053V05) is one such plan that provides combined benefits of Savings Plans, Retirement Plans, and Child Plans. Since the plan provides guaranteed returns, people with a low-risk tolerance can use it to achieve their short and mid-term financial goals. 

High-Yield Savings Accounts

A high-yield savings account provides comparatively higher interest rates on savings than a traditional savings account. You must consider high-yield savings accounts to accumulate funds in a low-risk, highly liquid instrument while earning a better return on investment.

Assessing Your Risk Tolerance

Low-Risk Vs. High-Risk Options

Low-risk investment choices are designed to preserve capital and generate predictable returns, making them ideal for low-risk profile investors or those investing to meet short-term financial goals. 

National Savings Certificates (NSC), Fixed Deposits (FDs), Senior Citizen Savings Scheme (SCSS), and Life Insurance saving plans with guaranteed returns are some low-risk options. They’re secure and highly liquid but yield lower returns. 

High-risk options, such as market-linked plans, are preferred investment choices for people with moderate to high-risk tolerance who prioritise long-term wealth generation. Consider investing in options like the Shriram Life Wealth Pro Plan (UIN: 128L096V01) if you want to earn a significantly higher return on investment and are ready to take high risks. 

Balancing Risk and Reward

Your financial strategy should be based on a balanced approach between risk and reward. Explore low-risk options if you have limited income and rely entirely on your earnings and savings to meet living expenses. 

People with additional disposable income who can absorb potential losses without disrupting their financial stability can consider high-risk options. 

Diversifying your investment choices is recommended for balancing risk and reward. Spreading your investment choices across different asset classes and risk categories can help you maximise return on investments without overly exposing yourself to market risks and volatility. 

Considering Tax Benefits

Tax-Advantaged Savings Plans

Different Savings Plans have different tax benefits, so you should explore tax implications relevant to your chosen investments. For example, your investments in Equity Linked Savings Schemes (ELSS), Life Insurance premiums, etc., can be claimed as eligible deductions u/s 80C to lower your taxable income and liability up to a maximum of ₹1,50,000/annum. 

Your interest earnings on traditional saving accounts can be claimed as a deduction u/s 80TTA, up to a maximum of ₹10,000/annum. Explore relevant tax-saving guidelines for optimal savings.

Maximising Tax Savings

The best way to maximise your tax savings is to utilise contribution limits under various sections, such as 80C, 10(10D), 80CCD(1B), 80CCC, etc. If you’re overwhelmed with the deductions and sections, consider consulting a certified tax professional for personalised guidance.

Seeking Professional Advice

Working with Financial Advisors

Consulting financial advisors is the best way to maximise your return on investments by finding the best Savings Plan and other investments aligned with your financial goals, risk-taking capacity, and desired returns.

They’re well-informed of the latest taxation guidelines, market conditions, available investment options, etc., so they can create a better financial roadmap to help you achieve all your financial goals.

Customising Your Savings Plan

Everyone has widely different financial circumstances and aspirations. Professional advice from certified tax planners or financial experts can help you create a customised financial strategy that matches your short and long-term financial goals and risk tolerance.

Conclusion

Choosing the right Savings Plans and other investments requires clearly defined financial goals, risk tolerance, and priorities. It can assist you to make informed investment choices that fulfil all your financial goals while respecting your risk profile.

You can explore Savings Plans and other Investment Plans at Shriram Life Insurance, one of India’s most trusted insurance providers, to find the suitable financial product for your needs. We also provide various Retirement Plans, Child Plans, and Protection Plans to help achieve various financial aspirations.