Ways To Choose A Long-Term Savings Plan

Do you have a long-term savings plan? Or are you willing to have one? Today, most people don’t even think before purchasing a long-term savings policy. This is because they truly understand their benefits. A saving plan is the greatest source to manage your money and expenses after your retirement. Also, they come up as great help for covering expenses like education, traveling, medical bills, weddings, etc. But, because there are multiple long-term savings plans to choose from, it can be a little overwhelming for you to make an informed decision. The good news is that you can easily make a decision based on your goals and needs. 

All you have to do is understand the factors that play a vital role when choosing a savings plan. Nevertheless, it is a very simple process of growing the savings. So, you must take a healthy decision about your finances keeping in mind the goals that are to be achieved.

With that in mind, in this article, we have listed the best possible ways to choose a long-term plan. 

Who requires a Long-term Saving Plan?

Anyone can have a long-term savings plan. They are not only for middle-class people. Even a rich person can have such a policy. If you want to utilise money at its best or make the most out of it, you can start with investing in a long-term saving plan. The different savings plans can help you diversify your income sources and even offer tax benefits while you add money to it or make the withdrawal. For instance, if you want to build/purchase a new house in the future, a savings plan with a higher interest rate can be the best option that might help in the future with a good down payment. 

Types of Long-Term Savings Plans

There are various types of long-term savings policies that vary from one another. You must choose as per your needs. Before you choose the right type of savings, look for the factors like the fees to be paid, taxes involved, and the interest you could earn. The different types of long-term savings plans are as follows:

Name of the Policy DescriptionLock-in-period
Public Provident Fund (PPF)The tool has been introduced by the Government in which you can invest a minimum amount of Rs.500 and a maximum amount of Rs.1,50,000 per annum. 15 years 
National Savings Certificate (NSC) The scheme sponsored by the government allows the small and medium-income investors to invest a minimum of Rs.100. There is no maximum limit on investment. 5 years 
Unit-Linked Insurance Plans (ULIPs)They ensure investment in the debt market and equity, giving insurance cover and decent returns for the long-term. You could achieve easy financial goals with the help of ULIPs. 5 years 
National Pension System (NPS) It is a tax-saving scheme that was initiated by the government. With this scheme, you can get pre returns or post-retirement benefits. Till retirement 
Equity Mutual Funds By spreading the investments across various sectors and companies, the equity mutual funds provide huge returns in the long term.3 years for tax-saving ELSS mutual funds. 
Long Term Bank Fixed Deposits It is a better option to choose to park funds in the long-term fixed deposit as they give higher interest rates than savings accounts. 5 to 10 years 

 

Things to consider before choosing a long term savings plan

There are many important factors that should be kept in mind while choosing the best saving plan. The factors are mentioned below: 

Identify your goals and needs: The first and most important thing before choosing a saving plan is to know your needs. Based on your needs, you can easily decide your goal – short-term financial goals, or long-term financial goals. Once you know why you need the policy, you can choose the right saving plan accordingly. 

Liquidity: The plan that you are choosing must have adequate liquidity to satisfy your needs. Know about the charges that come along with withdrawing. It should be liquid enough to allow the withdrawals in case of an emergency or urgent need. Never forget to consider the liquidity of an investment plan. 

Risk factor: While investing in a long-term saving plan, you should check upon the risk factors associated with it. Risk can never be eliminated but can be lowered by taking some necessary steps. An individual who decides to choose an investment plan should be able to maintain a definite balance between the rewards and the risk involved in the plan.  

Performance of the plan: You should never completely leave the plan after you have invested. It is very essential to keep a regular check on your portfolio every once or twice a year. By reviewing it regularly, you might find some necessary changes that need to be made and the actions to be taken for maximizing the profits. 

Look for the tax benefits: You must choose a saving plan that offers tax benefits. Many investment plans provide tax benefits that may not only deduct the amount of tax but also support you in case of an emergency. 

Check upon the diversity aspect: Always make sure that the investment plan does not restrict to a single investment. Go for those saving plans that may fulfil your purpose and also diversify the investment. 

Rules and regulations: You must have a lot of queries regarding the plan you are choosing. For that purpose, you should ask questions to clear your doubts. Different policies have different regulations. So, learn about each of them and do a bit of research for choosing the right investment plan. 

Conclusion:

You could easily have a long-term savings plan at a credit union, bank, and other financial institutions. Also, these institutions have certain policies like withdrawal limits, account fees, and penalties. Although many benefits come along with the long-term saving plan, before buying a long-term savings policy, make sure that you consider thoroughly the above-mentioned features.