Picking the right savings plan: a 5 point checklist

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Selecting the right saving plan

Jerry aged 27, has no savings so far, and wants to invest in a savings plan. For the sake of higher returns, he purchased a ULIP that invested only in high risk equities. By the age of 32, he was married with two kids and had greater financial responsibilities towards the family. After reviewing his ULIP investment portfolio , he realized that he cannot afford to invest in high risk equities and thus diversified his portfolio by distributing the investment risk between debt and equities.

Picking the right savings plan has the potential to provide long-term financial security to an individual and his family. Thus, it is necessary to remember the following points before investing in a savings plan:


  • Goal Setting: An individual would ideally need to achieve several financial goals at various junctures of his life ranging from buying a home, funding child’s education and marriage to saving for retirement. Chalking out these long-term and short-term financial goals shall give a certain clarity on spacing these targets across stipulated tenures. Once the targets are set, it is important to invest in customized savings plans that can help an individual achieve the set targets in the next 5, 10, 15, or 20-year window. For instance, investing in a child savings plan over a period of 15 years systematically can fund his/her higher education besides offering payout options depending on child’s education milestones.
  • Assessing Risk and Return Ratio:Evaluating an individual’s risk profile and his financial cushioning to bear any unexpected monetary shocks is essential before opting for a savings plan. Investors wish to reap higher returns by choosing aggressive savings plans, but it is cautionary to be aware of the high risks associated with them. It is advisable to maintain a balance between the risks and the returns associated with savings investment plan. Young people in 20s who mostly have minimal financial liability can afford to invest in a high-risk savings plan whereas middle-aged investors who are committed to greater financial responsibilities towards family and self should opt for savings plans that involve low to medium risks.
  • Protection and Flexibility:Besides building a significant corpus of savings over the policy tenure, a good savings plan should provide the necessary financial protection to an individual’s family while he’s gone. In the event of an insured’s death, an adequate life insurance cover and few required riders can address the financial needs of a family without burdening them. Although the main objective of a savings plan is to meet the long-term financial goals over a period of time, it must also provide some flexibility to take care of unexpected short-term needs by surrendering the policy whenever the situation demands. Additionally, the plan must allow some flexibility to increase or decrease the premium or investment amount as per the policy holder’s convenience.
  • Investment Options: A savings plan must have the right mix of investment options across fixed and liquid assets to enable the investor with enough back up in case of unexpected circumstances. Choosing a savings plan that invests in fixed assets like government securities is a low-risk option, but it shall not yield high returns. On the other hand, a savings plan that invests in liquid assets like equities shall yield higher returns but not without higher risks. So, avoid over exposure to a single financial instrument, and opt for a combination of fixed and liquid assets savings plan that shall offset the risks with the better returns without causing much loss to the investor in volatile situations. It is also important to look out for options like fund switch in a savings plan that allows for switching between investment funds with varied investment risks as per changing needs.
  • Tax Benefits: The best savings plans are also the good tax saving instruments. It is recommended to opt for a savings plan whose premiums payable are tax exempted under section 80 C, and section 80D, and maturity proceeds, death benefit are tax exempted under section 10D of the Indian Income Tax Act, 1961. These tax benefits shall help save extra money, in addition to the amount amassed by subscribing to a savings plan.

Investing and saving is a tedious but essential process that begins with setting the accurate financial goals across time frames. While the above checklist would be of great utility in picking the right savings plan, it must also be preceded by deeper market research on the available plans, and unit-linked insurance policies (ULIPs) are the most popular category of saving plans that serve a variety of financial objectives by garnering handsome returns. Good ULIPs such as the Future Generali Easy Invest Online is a systematic investment tool that can be easily purchased online, enhances returns and offers tax benefits on premiums paid over a period of 10 to 20 years. It is an ideal savings plan that can fulfil an individual’s dreams by providing a financial corpus for his retirement, child’s education or marriage, or just to save up for a rainy day. However, simply buying a great savings plan is not enough. It is necessary to review the investment portfolio periodically so that the changes can be made accordingly to maintain a positive savings picture to fetch better returns.

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