Creating more humanized content means communicating in the same way you would to a friend and not as a teacher in a class. As you aim to reach everyone in India, from a college student in Delhi to a retired person in Kochi, it is important to maintain clarity at all times.
Here, the objective is a Readability Score of 95+. This would basically mean using short sentences, no “expert” jargon, and of course, words used during a casual talk over a cup of tea.
What is an Endowment Plan?
Actually, trying to explain an endowment plan is like, “That’s a bag carrying two things.” Inside this bag, you have two things:
- Security: A life insurance cover to safeguard your family in case something happens to you.
- Funds: A money pot that increases over time and is eventually handed to you after a few years.
This type of plan is very popular in India, as it is considered very secure. You pay a small amount either every month or every year, and at the end of the plan, you get a large “thank you” amount (this is what we call the maturity benefit). If you are not around, that money will go to your family. It’s really simple and unwavering, and you won’t be tempted to skip any instalment.
Want the Best Investment Plan?
Most people, when searching for the best investment plan, actually want to have three things:
- Is my money going to be safe?
- What is going to be the extra amount I will get?
- Can I do a tax saving as well?
We have a lot of different things in India. Now, we will see how the endowment plan performs against the others.
1. Endowment Plan vs. Mutual Funds
Mutual funds are like a fast car. You know, they can reach very high limits, but the possibility of a sudden drop is also there when markets decline.
- Endowment: Slow and steady. It is almost like getting a guarantee of cash at the end.
- Mutual Funds: Faster growth but very risky. The money value can change up/down every day.
2. Endowment Plan vs. Fixed Deposits (FDs)
FDs are known to almost every Indian household. They are secure, but they don’t provide you with life insurance.
- Endowment: Besides inculcating a savings habit in you, it also gives you life cover.
- FD: Simply put away your money. Even if you die, the bank would only give you back the amount of your savings, not any additional insurance “protection” benefit.
3. Endowment Plan vs. PPF (Public Provident Fund)
PPF is indeed an excellent government friend; it doesn’t carry any risk and also helps in tax savings.
- Endowment: Suitable for a term of 10 to 20 years. It will assist you in accumulating funds for a major event like a child’s wedding.
- PPF: This is an excellent choice for staying financially prepared for retirement or other long-term goals (15 years+).
Why Go for an Endowment Plan?
This is the choice for many families, as it compels them to save. If you expect a bill, you will set aside money for it. This kind of “forced saving” is a neat trick for accumulating a large sum of money without you even noticing the effort.
Besides, we Indians love saving tax! Many of these schemes can help you cut down your tax outgo via Section 80C of the Income Tax Act. And more often than not, the payout you receive after maturity is tax-free. So, this plan is quite “friendly” to your financial health.
What Should You Go For?
Money has no “one size fits all.” What the best investment plan for you is depends on your life.
- You can think about choosing an Endowment Plan if: You want the assurance that, no matter what, you will receive a certain sum of money for your future goal. If you are to take care of your family and save money at the same time, this would be ideal for you.
- You can think of Mutual Funds if: You are young and in a position to wait for the market to grow. You wouldn’t also mind a few ups and downs along the way.
- You can go for PPF or FDs if: You merely wish to have a simple option to put your surplus money without getting any insurance facilities along.
Tips for Beginners in India
At the very beginning, it’s wise not to commit your entire savings to a single investment option. You might consider having a small endowment policy for safety and a small Mutual Fund for growth. Most importantly, before making a decision, think about the purpose of your investment: “When will I be needing this money?”
If your requirement is for a college education for your child after 15 years, the best way would be to go with a stable plan. If, on the other hand, your motive is only to accumulate wealth, high-risk and high-return plans should be looked at.
Conclusion
Money management doesn’t have to be about being a math wizard or a finance expert. The theme is being consistent. Be it an endowment plan or a bank deposit, the key to success is to start today. Saving even a small amount every month can accumulate into a huge sum over a period of time.
Always be thorough in checking the terms of the plan. If a word seems very big or ideally confusing, you may ask your agent to give the details in simple Hindi or your local language. Your money should never be kept in the dark!
Article received via email
