Every person aspires to live the life of their dreams. And to make those dreams come into reality, all you need is a structured approach to savings and Investment. To understand this better, let’s consider a real-life scenario. If you have children, they are typically the centre of your financial choices.
You should usually start investing early on when a child is young, thereby preparing yourself financially for the crucial milestones in their lives, such as realizing their dream of education at a prestigious school, studying abroad, or buying a family home. Financial stability and good Investment for future needs is something that every investor typically aims for. You can deal with these aspects through market-linked instruments such as the Unit Linked Insurance Plan or ULIP.
You may know what is ULIP in general, so let’s understand more about it in detail.
ULIP combines insurance and Investment in one plan and offers you good returns. It provides you with financial security in the form of a guaranteed amount (life cover) that serves as a safety net for the family during unwarranted situations before the policy matures. It is possible to use different ULIP plans such as partial withdrawals, multiple fund options, various premium payment options, and modes to configure one’s savings schedule.
ULIPs also allow you to make partial withdrawals once the lock-in duration finishes after five years. You can withdraw an amount partially from your ULIP fund to fulfil the need as and when a target is close.
Benefits of Buying the ULIP Plan Early
It is advisable to start with investments as early in life as possible. Generally, younger investors get more incentives for both insurance and investment opportunities than older investors.
By accessing the ULIP calculator available on most investment websites, you can easily explore such options. For those who are younger, the benefits earned are slightly higher than those received by older investors.
Read below the benefits of investing in a ULIP early in life:
1. Power of Compounding
The longer you remain invested, the higher your wealth accumulation, such as the power of compounding. By supporting early on in life, you facilitate your money to grow by accumulating savings for your long-term goals.
Similarly, with ULIPs, you can enjoy the advantages of compounding. Even if you leave the policy after five years, what you get in ULIPs would be far higher than what you will get by simply saving that money in a bank account without investing anywhere.
Over a longer period, the same money can create better returns with such plans than holding them in savings accounts or bank fixed deposits.
2. Inculcating the Habit of Savings
Today, many young and smart professionals make systematic investments in ULIP to achieve their ambitions right at the beginning of their careers. Try to develop a habit of saving from the beginning of your career, rather than in the later stage of your life. It will help reduce the pressure of a higher monthly contribution to your life goals and enable you to have a financial backup.
3. Big Risk Appetite of Young Investors
Early on in life, you are most likely to be free of all responsibility in terms of dependents. You may have the capacity for a more significant risk appetite or even making multiple investments. This is where you can opt for ULIP funds with greater equity exposure and get attractive returns to fulfil long term goals. You can’t overlook the fact that there is a reward where there is a risk too.
4. Tax Savings
Investment options do not always include tax advantages. But ULIP is a life insurance product, and therefore it provides tax benefits. You get tax rebates for the premiums paid. Under section 10D, all pay-outs earned are tax exempt. So, you will grow your money and make additional savings in the form of tax benefits.
5. A Mix of Investment Choices
While taking calculated risks is not a bad thing, you must always tread with precautions. One easy way to ensure that you make intelligent investments is to mix different investment choices.
For example, if you are a low-risk taker, you can choose to invest in debt funds through ULIPs. If you are a high-risk taker, you can select equity funds. Depending on your market outlook, you also have the option of swapping between funds.
ULIPs can be an ideal investment choice for your long-term financial objectives and can be better financial instruments for providing risk coverage. ULIP investments in your early 20s to 30s are beneficial as they will contribute to a vast corpus as you grow old. To ensure you make an informed choice about investing in ULIPs, you can explore options online and compare the plans online to find a suitable ULIP plan.