The year 2021 has brought with it a renewed sense of optimism, which is why most individuals have made certain financial resolutions. Savings plans are essential life insurance policies that offer you an opportunity to save and build a corpus to meet your future needs. These are designed to help policyholders develop a regular savings habit, as well as give significant returns when you need them.
The pandemic has shown the significance of having an emergency fund to assist you to get through a job loss. On the other side, the pandemic has additionally made saving harder as deposit rates have fallen to all-time lows. Deposit rates will probably stay low in 2021, yet that shouldn't deter you from saving. Building up a savings plan is the first step in growing an emergency fund. Start with deciding the amount you need. At a minimum, your savings should be able to cover 3 months to 6 months of living expenses. Whenever you decide the proper amount to save, include regular contributions to your emergency fund as part of your monthly budget.
Every individual has different financial needs and risk appetite. You have to consider the following factors before you choose the savings plan that is right for you.
Goals change for every person at different stages in life. Assess your short- and long-term goals, the time you need to achieve them, and the funds required to fulfill them. This will enable you to work out how much you need to start putting away in a savings plan to accumulate the funds you desire. You can even study the various guaranteed income plans. The goals can range from funding your children's education and building a house, to developing a corpus for the retirement years.
Select features that are affordable for you and can meet your future needs. Make sure your plan can give you the flexibility to access your funds in case of an emergency, and whether you can get a loan against it or not. Check for various riders like accident, disability, and illness that help you get additional coverage. With the right coverage and flexible options, one can enjoy protection as well as growth through savings plans.
Choosing an investment horizon helps to ensure that the cover you have opted for is available when you need it. It also helps you map your long-term goals and financial requirements that let you choose the right plan accordingly.
Savings plans offer a variety of choices that cater to all risk appetites. Age and personal factors determine the amount of risk people can take while investing in savings plans. People who have a higher risk appetite can choose more aggressive plans that offer lucrative returns, while those who are risk-averse can opt for conservative savings plans that provide more security but give relatively lower returns.
Do not go for the first savings plan that appeals to you. It is better to review and compare different plans, their features, and benefits and then choose the one that aligns with your future needs. Ideally, use a savings and income calculator to determine the ideal coverage and premium payable towards the savings plan.
As recommended above, it is crucial to start 2021 with a savings plan and make sure your savings account has the features that will help make your savings plan a success. Keep in mind that you may not be able to find all of the features at any one bank, so focus on choosing the account that has the features that are most important for you to be able to accomplish your savings plan.
Adopt the following practices to save money:
There are many ways to answer this question. However, in short, we can say one should save a minimum of 20% of his/her income. At least 10% to 15% of that should go towards the retirement fund.
Persons who have a regular income and know they would require a lump sum amount after some years should invest in a savings plan. These plans are also good for working professionals, self-employed persons, and entrepreneurs so that their long-term financial obligations can be fulfilled easily. For individuals who do not want to risk much and would like to grow their wealth through relatively safer mediums, savings plans are a good choice.
A simple thumb rule for savings says that you should save 2 times your annual salary by the age of 35. This means that if you are in your 20s, you need to save 20% of your income, 30% if you are in your 30s, and so on. In an uncertain world, it is better to save 30% of earnings to be prepared for any contingency.
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