Saving Scheme
Money you should save every month
How much money you should save? Answering this question is a continuous struggle if you are trying to save without a long-term plan. Savings can make you less dependent on your employment for income. However, it usually takes a long time to achieve such financial independence.
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Saving the Minimum 10% & Why?
The minimum 10% rule says that the moment you start earning you should save at least 10% of your income. If you have just started earning and you do not know how to save money, you can invest in a savings plan. Saving plans are life insurance plans that offer you an avenue to save for your life goals. The corpus you build can secure your post-retirement life by the age of 60, assuming you start earning by 30 years of age.
This is the same formula followed by the government saving policy for retirement contributions to EPF or NPS accounts. However, 10% is only a minimum amount. If you truly wish to secure your post-retirement life, you need to invest more due to the:
- Uncertainty of income continuity
- Market or investment risks (the rate of return may be less in the future)
The minimum saving amount does two things for you – 1. It secures your retirement after at least 30 years, and 2. You can have the best lifestyle possible with your income. The problem with minimum savings is that it only provides for these two.
Saving the Maximum 50% & Why?
Unlike the minimum savings, maximising your savings requires striking a balance between your lifestyle and future goals. Maximising savings should not mean living the minimal lifestyle you can maintain. However, it does need additional efforts to focus on important expenses and planning for the future.
Usually, the planners will allocate your savings in the following manner:
|
Saving % |
Goal Term |
Examples |
|
10-15% |
Long-term |
Retirement, legacy goals |
|
20-25% |
Long-term |
Children’s higher education and marriage goals, second home purchase goal |
|
5-10% |
Mid-term |
Car upgrade, home renovation, etc. |
|
5-10% |
Short-term |
Big electronics, lifestyle purchases |
|
1-5% |
Emergency Safety |
Term insurance, health insurance, emergency fund |
With a 50% allocation, you can ensure not only your long-term financial safety but also provide for your short and mid-term financial needs.
What if You Can’t Save Right Now?
You may feel as if you cannot save anything right now, as you have just started earning and barely have enough to last for the full month. However, if you are working in the organised sector, you may be already contributing 5-6% of your salary to retirement funds.
Matched by your employer, this amount may be enough to ensure retirement safety. However, you are still unprepared for other financial needs you will encounter on the way. Also, the start of your career is a critical time to build your savings habit.
These plans allow you to save as little as just Rs 500 per month. Which is still a better start than saving nothing. As you gradually progress, increase your savings as your income grows.
Building an emergency fund and securing health and term life insurance coverage is also important. These measures help you:
- To be confident with your career moves
- Have financial stability during short-term emergencies
- Financially protect those who depend on you
How to Find the Best Savings Plan for your Life Goals?
Once you have planned your allocation you can start finding the right investment option. Additionally, you can also look at the tax saving angle as it will become important once your income grows over time.
Best saving plans would also offer a guarantee for maturity value. Here are the features and benefits you should consider to find the best savings plan for your goal:
- Life Cover: Offers additional protection to your goal in case anything happens to you before you complete it
- Monthly Investment Option: Ensures lower investment and easier on budget.
- Flexibility of Investment Term: Allows for a shorter investment term, so that you can focus on other goals as well.
- Adequate Policy Term: Should match the goal closely, so that you can avoid switching between investments.
- Guaranteed Additions: Allows for steady growth and investment safety.
- Premium Protection Option: Safeguards the maturity value of the plan. The insurer invests in your savings plan after your untimely death. The family will be able to fulfil their goal at maturity. The family also receives the death benefit upon your death.
- Option to Receive Regular Income: Regular income option will be useful if you are saving for higher education goals for the child. This option gives you a regular sum every year.
iSelect Guaranteed Future from Canara HSBC Life Insurance
iSelect Guaranteed Future plan is one of the guaranteed savings plans from Canara HSBC Life Insurance which offer all the features of an ideal savings plan. Take a look at the key features of the plan to make an informed decision:
- Investment Term: 10 years to up to 65 years of age
- Investment Risk: Safe
- Goal Suitability: Long-term
- Tax Saving: Completely tax-free
- Investment Limits: Rs 2000 p.m. to no upper limit
- Premature Withdrawals: Premature withdrawals are not available, however, you can borrow at low-interest rates from the policy
- Premium Protection: Available
- Regular Income: Available after the end of the premium payment term
It is one of the best plans to save for your child’s higher education and marriage goals. The premium protection feature allows you to ensure the safety of your child’s future even when you cannot be there to fulfil it.
Additionally, you can use the e-insurance account to monitor and manage the policy online. With a minimum monthly investment of just Rs 2000, you can start saving for guaranteed benefits quickly.
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