Saving schemes are important for individuals of a country and, in turn, for an economy because of the following reasons:
- Safety: Depositing your hard-earned excess money in saving schemes will help secure it for your future needs. Holding on to liquid money may not be safe.
- Retirement Funds: Periodically, depositing money in long-term saving schemes can help you build a retirement corpus. When you start saving from a young age, it will reward you with a huge corpus that can be used after your retirement and let you lead a comfortable life.
- Long-Term Benefits: Since most of the schemes make use of compound interest concept for interest calculation, long-term investment can fetch you unbelievable returns. The minimum lock-in period of these range between one to fifteen years, and the maximum can go until you reach the age of 60 years. The compounding of returns, coupled with long-term savings, will earn you interest on interest and end up as a huge amount on maturity.
- Tax Savings: Many saving schemes offer one or the other kind of tax benefits—may it be tax deductions, exemption, or both. Some schemes qualify for a tax deduction on investment of up to Rs.1.5 lakh under Section 80C of the Income Tax Act. Another set of schemes offer an exemption on the investment, interest accrued, and the maturity amount.
- Avoid Unwanted Expenses: When you have all the money at hand, you may end up spending it on unwanted items. On the other hand, investing the surplus that remains after meeting the necessary expenses in a suitable saving scheme will help avoid expenditure on unnecessary goods and services.
These saving schemes cater to a wide variety of investors. Most of them are government supported thus there is guarantee of returns at attractive rates. However, interest rates, tax treatment and lock-in period are different for different schemes. Thus, investors should go through the schemes and select the most suitable option for them as per their goals. Individuals may also invest across a combination of best savings schemes for optimal growth of wealth. When considering these alternative saving and investment options, it's essential to understand the associated risks, costs, and tax implications. Diversification of your investments, both within traditional and alternative options, can help manage risk and achieve your financial goals. It is also advisable to take expert advice or do thorough research before committing to any investment.
Various savings schemes available in India are:
- National Savings Certificates
- Public Provident Fund (PPF)
- Sukanya Samriddhi Yojana
- Kisan Vikas Patra (KVP)
- India Post Saving Schemes
- Sukanya Samriddhi Yojana (SSY)
- National Pension Scheme (NPS)
- Equity Linked Savings Scheme
- Pradhan Mantri Jan Dhan Yojana
- Equity Linked Savings Scheme (ELSS)
- National Savings Monthly Income Account
- National Savings Certificates (NSC)
- Atal Pension Yojana (APY)
- Senior Citizens Saving Scheme (SCSS)
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