Building wealth is an essential part of financial planning. In order to plan a comfortable living and secure the financial future of your loved ones, you need to have savings plans and insurance plans that sufficiently cover expenses.

Young adults have huge financial responsibilities and the means to plan their finances effectively using today’s various savings plans.

What are savings plans?

Savings plans are investment corpus that you can build through the habitual acquisition of assets. These assets can be accumulated in many forms, including investments in steady funds that offer guaranteed returns.

You can build savings plan through investments in insurance plans, government schemes, retirement funds, etc. In the new age of financial stability and technological advancements, savings plans with enormous bonuses are available to you. You can utilise savings plans to plan your current finances as well as secure your golden years, and provide for your loved ones even after your demise.

You can get creative with term insurance to plan your savings effectively. With a sufficient sum assured and riders on term insurance, you can guarantee a sufficient corpus for your loved ones. You can also indulge in different forms of life insurance that offer money-back plans, bonuses, and maturity benefits. If you survive the insurance policy tenure, you can avail of the maturity benefit, which is a lumpsum amount that serves as a massive savings plan accumulated over the years.

Types of savings plans for young adults

There are various forms of savings plans available for young adults these days, which are as follows:

1. Endowment plans – Endowment plans are forms of life insurance wherein the money you invest grows periodically and offers you bonuses as a participating member. You can also invest in endowment plans as a non-participating policyholder wherein your beneficiaries will receive the death benefit, and you will receive the maturity benefit without the bonuses.
2. Money-back plans – These are life insurance plans that allow you to make periodic withdrawals from your insurance plan during dire financial needs. The insurer pays you a certain percentage of the amount that you invested at regular intervals. If you survive the policy tenure, you receive the remaining sum as a maturity benefit. However, if you meet an untimely death during the policy tenure, then your beneficiaries will receive the death benefit in full.
3. Provident Funds – These are forms of savings plans that allow you to put aside money as an employee or as part of a government scheme. They offer predefined and guaranteed returns on your investment when the fund matures.
4. Pension Schemes – These are savings funds that you build for your golden years. You will have to invest money periodically in pension schemes and when you reach retirement years, you can avail of the benefits as monthly payments are in a lump sum amount.
5. Fixed deposits – These are fixed forms of savings plans wherein you invest a predefined amount of money every month or year. It requires habitual investment. The fixed deposit increases by a fixed percentage offered as returns annually. When it matures you can avail of a lump sum amount of money to meet your financial goals.

You can choose the type of savings plan that best works for you and your loved ones. You will need to determine the basic corpus that you wish to build and ensure that it is affordable in your current financial planning.

For instance, if you opt for a 30 lakhs term insurance, then the 30 lakh term insurance premium should be affordable in your current financial plan. If it is too low, then you can increase the premium, thus securing a higher sum for your loved ones.

Determining a sufficient savings corpus

When planning the future finances for your loved ones through different forms of life insurance or planning your savings, you need to take into account the premiums or deposits that you will need to invest.

For example, a 30 lakh term insurance premium will allow you to avail of a 30 lakh sum assured, which will be paid as a death benefit. However, if you survive the policy tenure, then only the 30 lakh term insurance premium paid over the years will be supplied as a maturity benefit. This amount may not be the same as the death benefit, but it is still an effective savings plan.

Similarly, the amount that you invest in fixed deposits, provident funds, and other forms of savings plans must also be affordable but also build a sufficient corpus. When determining the type of savings plan and the investment amount, you must have a clear idea of the total corpus that you wish to build. The more you invest, the higher the corpus in your savings plan will be, which will inadvertently ease the financial struggles in your golden years and for your loved ones in the event of your unfortunate demise.