Our parents instilled in us the importance of having a long-term savings plan even when we were children. The significance of maintaining disciplined savings throughout one’s life is at the root of all of these practices. Hence, we can see a major difference in the today’s world when it comes to saving. According to a research report, India’s savings rate has risen dramatically over the last few decades. However, there is a good number of people who haven’t given it a thought. Therefore, let’s take a look at ten reasons why you should start a savings plan.
- Emergency Funds
A savings plan can alleviate your financial burden especially during an emergency. The best illustration is the current recession, where savings have guaranteed that school fees are paid and that the home functions despite a job loss.
Another important reason to save money is for retirement. Having a savings plan can help you enjoy your retirement without any worries about money, even if your children do not support you.
- Savings Used to Buy a House
A savings plan can help when you want to make a down payment on a home. You can avoid mortgaging personal property or chasing down loan providers in search of a private loan with higher interest rates. You can also get better interest rates on a home loan. In addition, it can assist you in borrowing less money, allowing you to make more affordable mortgage payments.
- Large purchases
Your tax saving plans can be used for items you want as well as those you need. You won’t have to pay extra towards interest and fees if you save up for a large buy in advance. For instance, instead of taking a car loan, you can save up enough money to buy a new car and pay for it all at once.
- Irregular or recurring expenses
To cover such expenses, set up a sinking fund. These funds are set away for future expenses such as taxes, holiday gifts, auto repairs, house improvements and other bills. These extra savings could keep you from having to dip into your emergency funds.
- Life Changing Events
Remember to start a savings plan for your child’s schooling or marriage. The money saved will allow them to pursue a career of their choice and will help you settle your children without incurring further costs.
- Reduction Of Taxes
Since saving plans are a type of life insurance, they provide the same tax advantages as other insurance plans. According to Section 80C of the Income Tax Act, you can get a refund of up to Rs 1.5 lakh towards your premium payments.
- Helps to Have a Systematic Plan
While people understand the need to save money, they sometimes lack the skill and understanding to do it. Tax saving plans help to develop a habit of saving, in a systematic and disciplined manner. This will help in growing your personal income in the long run.
- Become Debt-Free
If you desire to become debt-free, then you need to have a savings plan in place. Credit cards will never be paid off if you keep using them for every ‘emergency’ that arises. The right plan will help you recognize and identify if you are spending beyond your earnings. This will help limit your expenses and provide greater financial control.
- To Live a Happy Life
Living a stressful lifestyle has significant emotional, psychological, and physical implications. Growing financial troubles can lead to strains in your professional and personal life. On the other hand, by putting money away to spend when you need it, you essentially take charge of your future and financial stability.
Tax saving plans can be extremely useful and simple to implement. However, with so many different plans available from different financial institutions, the best approach would be to read the policy document thoroughly, and make an informed decision.