Why Should You Consider Purchasing a Savings Plan in Your 20s?
Table of Content
Your 20s are a pivotal time in your life. You enter the workforce and understand the importance of financial responsibility. During your 20s, you must establish a solid foundation for the future. As you begin the journey towards financial independence, let’s see how financial planning in your 20s sets you up for future success.
Why Should You Buy an Investment Plan in Your 20s?
Starting an investment plan in your 20s enables you to enjoy the following benefits:
- Long-Term Wealth Creation
Time is your most valuable asset when it comes to investing. Planning your finances in your 20s leaves you enough time to build a significant corpus and fulfil your future goals. Small investments can leverage the power of compounding for exponential growth. You can purchase a savings plan that uses compounding interest to generate substantial wealth. Buying a policy in your 20s can set you up for financial stability and security in the future.
- Cultivate a Disciplined Savings Habit
Savings plans require you to put funds away periodically for the future. Investing in your 20s helps you develop financial discipline and responsibility. Your habits in your 20s set the tone for future financial decisions. Prioritising your financial health from a young age ensures you avoid building up debt and overspending.
- Opportunity to Learn
When you start an investment plan in your 20s, you can learn about various financial tools and how they work. You can try multiple savings plans and investment avenues to identify which works best for you and your goals.
What to Consider While Choosing an Investment Plan in Your 20s
Before you identify investment avenues, you must carefully evaluate the following factors:
- Financial Goals
Ask yourself what you want to achieve in the future. Start by outlining your financial goals and calculating how much you require to fulfil them. Set a realistic timeline for each aspiration and then identify savings policies and investment plans that align with your goals. Having a target in mind helps streamline your finances and gives you something to work towards.
- Risk Appetite
How much risk can you afford to take? Most people offering financial advice for your 20s recommend taking risks when you’re younger. However, when it comes to investments, one size does not fit all. Risk-averse individuals may opt for guaranteed or fixed returns, while those who can take risks may opt for high-risk, high-reward options.
When you start working, you may not earn enough to invest immediately. Take stock of your income and expenses and understand how much you can put away each month or year. Look for plans that allow you to increase your investment amount over time or offer payment flexibility.
- Insurance Coverage
Every sound financial plan includes security coverage. You can look for investment options that provide life insurance coverage to safeguard your family’s financial future.
- The Company’s Reputation
While looking for savings plans in your 20s, evaluate the insurance company’s reputation. Check their claim settlement ratio and customer reviews. Select a credible company to safeguard your money and build wealth for the future.
- Flexibility and Liquidity
When identifying saving plans to meet your goals, consider the flexibility offered. Look for policies that let you choose the premium payment frequency and allow partial withdrawals from the corpus. You can rely on these funds in financial emergencies.
- Tax Benefits
Look for plans that maximise your future finances while minimising your tax liability today. Many savings plans provide tax insurance benefits under Section 80C of the Income Tax Act*.
What Is the Ideal Investment Plan in Your 20s?
When it comes to savings and investments, every person and situation is unique. Identify plans that help you meet your future financial aspirations. Consider policies that offer life insurance coverage for added protection for your family. Evaluate how much you can afford to invest and how often you should. Finally, consider the tax benefits of your plan.
Investing in your 20s helps lay the groundwork for a stable and secure financial future. When you’re young and ready to invest, ensure you evaluate your goals, risk appetite and timelines. Find options that align with all three and start building a corpus for the future. Remember, you are never too young to invest. Getting started in your 20s allows you to understand the market and make better financial decisions in the future.
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Reviewed by Life Insurance Experts
ARN - ED/06/23/2819