A savings plan is a financial instrument that allows an individual to set aside money regularly to accumulate funds for future needs. Be it for your child鈥檚 education or a dream vacation, there is a variety of savings options in the market for different financial goals and requirements. It promotes discipline by requiring you to commit to saving a set amount for a defined period.
This money grows over time due to interest or investment returns, allowing you to attain your goals with less stress. Savings plans can also provide financial security for your family in the event of an unforeseen disaster. It is an ideal investment option for salaried people earning a monthly income. Here is a list of the best monthly savings plans for small investors.
Unit Linked Insurance Plan (ULIP): A Unit Linked Insurance Plan (ULIP) is a financial vehicle that combines investing and life insurance. Investing in this program provides you with insurance coverage as well as investment benefits. In this scheme, a portion of your premium goes for life insurance and the rest is invested in various market-linked funds.
Equity Linked Savings Scheme (ELSS): It is a type of investment plan that allows investors to invest in market-linked instruments such as equity or equity-related components. It is also called a tax-saving scheme, as ELSS provides a tax exemption of up to Rs 150,000 from your annual taxable income under Section 80C.
Recurring Deposits (RD): Under this savings option, investors can deposit a fixed amount regularly and earn interest on their investments. Offered by post offices and banks, this term deposit is ideal for those looking for a disciplined savings habit.
National Saving Certificate (NSC): This government-backed savings plan has a five-year lock-in period and offers guaranteed returns and full capital protection. Investors buy NSCs from post offices or recognised banks for a specific denomination and lock in their investment for a set period of time, usually five or 10 years. Interest earned on NSCs is compounded annually and qualifies for tax deductions under Section 80C.
Employee Provident Fund (EPF): This government-backed savings scheme is designed to help salaried employees build a secure retirement corpus. Every month, both the employer and the employee contribute a fixed percentage of the salary.