Comparison Between Saving and Investment Plan

Comparison Between Saving and Investment Plan

People from all areas of life frequently use the phrases "saving" and "investment" interchangeably. While their primary goal is to help you protect your financial future, you should understand the distinction between a savings plan and an investing strategy.

As part of long-term financial planning, every individual should engage in both savings and investments. A specific financial plan that includes both savings and investing components, however, may work differently for various people.

Therefore, it is critical to grasp the distinction between investment goals and savings as early in life as feasible. Let's go through this in more depth.

Difference Between Saving and Investments

1. Access to Money

Savings might come in helpful in times of need, such as a medical or financial emergency. You can simply access or spend the money you've been putting aside for a long time. It is entirely up to you whether to withdraw a portion of your life savings or the entire sum all at once.

The ability to access cash is a significant distinction between savings and investing strategies. Depending on the sorts of investment alternatives you pick, you may lose this quick and easy access to your funds when you invest.

Investing in open-ended equities mutual funds, for example, allows you to redeem your investment at any time. The same cannot be said with Equity Linked Savings Schemes(ELSS), which has a three-year lock-in term.

2. Risks

This is another key distinction between investing and savings that influences an individual's financial decisions. The lesser danger of losing money is one reason why individuals retain their money in bank accounts. When you go the savings way for financial planning, you take on the least amount of risk.

Investing money, on the other hand, may carry a variety of risks. It is concerned with the potential loss of money or the potential gain as a result of the influence of market circumstances on your assets. This risk aspect is what distinguishes a savings plan from an investing strategy.

The danger of investing money varies depending on the financial instrument used. Direct stocks, for example, have a different risk factor than equity mutual funds. It is critical to invest prudently in order to balance the risk-to-return ratio. That is why individuals seek the advice of financial consultants when it comes to long-term financial planning.

3. Goals

Another significant distinction between savings and investing plans is the objective or aim for which they have been adopted. Sometimes, savings are intended for achieving minor goals in a short period of time. For example, if you desire to take a trip abroad with your spouse in two years, saving a modest sum each month can easily help you achieve this objective.

When following a long-term plan to accomplish larger goals, the best investment plans play a crucial role. A good example is a child's further education planning. The idea is to have enough money saved up till your child decides to pursue higher education. Investing money for this purpose is a superior alternative because your money will increase over time.

Investment Plans

These are financial tools that allow you to invest your money in order to build wealth for future requirements. Depending on your risk tolerance, you can make systematic, regular contributions to a variety of funds through various investing programs. You may simply find investment options that contain insurance or life insurance to protect your family's future. An excellent example is ULIP (Unit Linked Insurance Plans).

In the argument between savings and investment plans, ULIPs prevail on the basis of return and a variety of other factors. These investment plans enable you to take a flexible approach to invest money in various funds in order to balance investment components. You will get market-linked returns on your investment funds, as well as the possibility to save tax.

Savings Plans

Saving plans are life insurance programs that allow consumers to earn guaranteed returns on their saving in exchange for disciplined savings. They are intended to assist you in starting a savings journey in order to grow a corpus over time and secure financial stability for your loved ones' future when you are no longer around. You have the option of receiving a lump-sum payment or monthly income as a payout.

Decide How Much to Save and Invest

Any single explanation cannot justify the varied queries people have about savings vs investing plans. To better grasp the difference between a savings and an investing strategy, keep the following two key ideas in mind :

  • Set aside enough money to meet personal expenditures such as insurance premiums, loan EMIs, and any unexpected bills.
  • Long-term goals that need a significant investment over a period of 10 to 15 years should be investment-driven. For example, if you want to purchase a new home in ten years, you must devise an investing strategy to achieve this goal. You may also use an investment calculator to get an estimate.

To determine how much you should save and invest, you must examine a number of criteria.

1. Make a List of Your Objectives

Before deciding between an investing plan and a savings strategy, it is critical to first identify your goals. The basic purpose of saving money is to preserve the value of your wealth and make it available for daily requirements. Make a list of the costs that can be met by savings.

In addition to understanding the distinction between savings and an investment plan, if you want to invest, consider your long-term goals. Various investment products allow your cash to expand in accordance with the level of risk involved—set goals, such as a child's schooling or your retirement plan. Maintaining a lengthy timeframe with investing plans is highly recommended to balance the impact of market ups and downs.

2. Analyse Your Income

Consider your income while determining the difference between investment and savings. A significant portion of very individual's monthly salary goes toward satisfying the family's varied financial commitments. There are various components for which you require a certain amount, such as home requirements, children's schooling, or current loan EMIs. What remains after paying all of these bills can be saved or invested.

Saving or investing objectives necessitate a certain amount, regardless of how much you make each month.

So, this is everything you need to know about savings and investment plans. As mentioned above, it's advisable for every individual to have both of these instruments in their portfolio. However, it's a good idea to assess your needs and requirements while choosing your plans.

Disclaimer:

The Unit Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of the fifth year. The premium paid in Unit Linked Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Past performance of the Fund Options is not indicative of future performance.

Suggested Plans

Bharti AXA Life Guaranteed Income Pro

  • A Non-Linked, Non-Participating Individual Life Insurance Savings Plan
  • 4 Income options to choose
  • Guaranteed 10% Addition of Annualised Premium (as per the terms and conditions of the policy)
  • Get all your premiums back at the end of the payout period under Long Term Income and Deferred Income variants
  • Flexibility to choose premium payment term or policy term

Bharti AXA Life Super Series

  • A non-linked non-participating individual life insurance savings plan
  • Range of investment duration and returns
  • Guaranteed money back benefits (provided policy is in force and all due premiums have been paid)
  • Income tax benefits (as prevailing tax laws in India that are subject to changes)

Bharti AXA Life Shining Stars

  • Non-linked, non-participating limited pay endowment Life Insurance plan
  • Designed to take care of the financial needs of your child.
  • Flexibility to opt between 2 Maturity Payout Options
  • Flexibility in Policy Term/Premium Payment Terms
  • A great short-term investment option for a child insurance policy.

Frequently Asked Questions (FAQs)

What are investment plans?

These are financial tools that allow you to invest your money in order to build wealth for future requirements.

What are savings plans?

Saving plans are life insurance programs that allow consumers to earn guaranteed returns on their saving in exchange for disciplined savings.

What’s a ULIP plan?

Unit linked Investment Plans are investment and insurance instruments that offer a combination of insurance and investment benefits.

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