Saving money is always the foundation of a healthy financial portfolio. Even young children can do it! It’s never too late to start saving, but the earlier the better. But, having your money in a low-interest account is not the best use of your funds. Instead, you should make sure to make your money work, thereby increasing your savings.
But, what are the best options for your savings and how can you make sure to increase your funds while keeping them secure? Here are 10 of the best options for growing your savings accounts so you can save up for all the important purchases and expenditures in your life.
| Scheme | Current Interest Rate |
|---|---|
| National Savings Certificate (NSC) | 7.70% |
| Senior Citizen Savings Scheme (SCSS) | 8.20% |
| Post Office Monthly Income Scheme (POMIS) | 7.40% |
| Public Provident Fund (PPF) | 7.10% |
| Kisan Vikas Patra (KVP) | 7.50% |
| Sukanya Samriddhi Yojana (SSY) | 8.20% |
| Employee Provident Fund (EPF) | ~8.25% |
| Voluntary Provident Fund (VPF) | 8.25% |
| Nation Pension Scheme (NPS) | Varies |
| Unit Linked Insurance Plans (ULIPs) | Varies |
What is a Savings Scheme?
A saving scheme aka savings plan is a type of investment that helps you meet specific financial goals. There are several different types of savings plans including
- Unit Linked Insurance Plans (ULIPs)
- Public Provident Fund (PPF)
- National Savings Certificates (NSC)
- Post Office Monthly Income Scheme (POMIS)
- Senior Citizens Savings Scheme (SCSS)
- And many more…
Choosing a plan consists of weighing the important aspects that matter to you, such as the potential tax benefits, interest rates, and maturity periods, along with factors like risk, investment horizons, and personal financial goals.
Types of Saving Plans in India
There are many types of savings plans you can invest in to make the most of your money. Here are some of the best choices for earning interest on your hard-earned funds.
National Savings Certificate (NSC)
Backed by the government, this plan has a fixed interest rate with a 5-year lock-in period, so be sure you do your research before opening such an account.
It is a low-risk option with tax benefits and is suitable for a small-to-medium investment.
Key Features:
- Government secure
- Fixed-rate means you will not get less than you expect
- Tax benefits according to Section 80C of the Income Tax Act
- Minimum investment needed is only ₹ 1000
- Is available at post offices
Senior Citizen Savings Scheme (SCSS)
This option is one of the best savings plans. It is a government-supported investment option tailored for individuals aged 60 and above. It provides a higher interest rate compared to other savings plans and ensures a steady income during retirement.
Key Features:
- Available to individuals aged 60 and older.
- Individuals aged 55–60 can also open an account if they have retired under superannuation, VRS, or special VRS.
- Minimum investment: ₹ 1,000.
- Maximum investment: ₹ 30 lakhs.
- Tax benefits available under Section 80C of the Income Tax Act.
- Accessible at post offices and banks.
Savings schemes are programs that incentivize making smaller deposits regularly in order to create a large amount of savings over time. Plus, with interest, the money in the account makes money.
Post Office Monthly Income Scheme (POMIS)
This scheme is a savings plan from the Indian Post Office that offers investors a reliable monthly income. It’s a popular option, especially for retirees, who seek a steady cash flow.
Key Features:
- Provides investors with a fixed monthly income throughout the investment period.
- The scheme has a maturity period of 5 years.
- Requires a minimum investment, with varying maximum investment limits.
- Interest earned under the MIS is subject to tax.
- Investors can nominate a beneficiary to receive the funds in case of their passing.
- Loans can be availed against the deposit in emergencies.
Public Provident Fund (PPF)
The PPF is a long-term investment scheme provided by the Government of India, known for its tax advantages and security.
Key Features:
- Qualifies for tax deductions under Section 80C of the Income Tax Act.
- Maturity period of 15 years.
- Interest is compounded annually and added to the account balance.
- After three years, investors can take a loan against the balance.
- Partial withdrawals are permitted after five years.
- Investors can nominate a beneficiary to receive the funds in case of their passing.
Kisan Vikas Patra (KVP)
This savings scheme is provided by the Indian Post Office, designed to double the invested amount within a set timeframe. It serves as a long-term investment choice.
Key Features:
- The investment amount doubles over a specific period (currently approximately 124 months).
- Requires a minimum investment.
- Interest earned on KVP is subject to tax.
- Investors can nominate a beneficiary to receive the funds in the event of their passing.
Sukanya Samriddhi Yojana (SSY)
Another government-backed savings scheme, the SSY is aimed at securing the financial future of a girl child. It encourages parents or legal guardians to save for their daughter's education and marriage.
Key Features:
- The account can be opened in the name of a girl child under 10 years of age.
- It matures 21 years from the date of opening.
- Annual deposits range from a minimum of Rs. 250 to a maximum of Rs. 1.5 lakh.
- The interest rate, set by the government, is generally higher than other savings schemes.
- Deposits qualify for tax deductions under Section 80C of the Income Tax Act.
- Partial withdrawals are permitted for the girl's higher education.
Saving money is necessary for security. Some reasons to save money are: to have backup funds in case of an emergency, to make a big purchase like a home or vehicle, for higher education, for weddings, for retirement, for vacations or pilgrimmage.
Employee Provident Fund (EPF)
The EPF is a compulsory retirement savings plan for employees in the organized sector. Contributions to the EPF account are made by both the employer and employee as a fixed percentage of the employee’s salary. This makes it one of the best saving plans for students since they can begin it at a young age when they get a job and keep it through their entire working life.
Key Features:
- Employees with a basic salary above a certain threshold are eligible for EPF.
- Both the employer and employee contribute 12% of the basic salary plus dearness allowance to the EPF account.
- The government sets the EPF interest rate each year.
- Members can take loans against their accumulated EPF balance.
- Partial withdrawals are permitted under specific circumstances, such as marriage, higher education, or home purchase.
- Upon retirement, members can withdraw the full accumulated amount as a lump sum or choose a pension option.
Voluntary Provident Fund (VPF)
Yet another government-supported savings scheme, the VPF allows employees to voluntarily contribute an additional portion of their salary, over and above the mandatory EPF contribution, to grow their retirement fund.
Key Features:
- Employees can contribute any amount beyond the mandatory 12% EPF contribution.
- VPF contributions are eligible for tax deductions under Section 80C of the Income Tax Act.
- VPF generally offers a higher interest rate compared to other savings options.
- Funds invested in VPF are subject to a minimum lock-in period of 5 years.
- Loans can be taken against the VPF balance in emergencies.
- Employees can nominate a beneficiary to receive the VPF balance in the event of their passing.
Nation Pension Scheme (NPS)
This voluntary, long-term retirement savings plan was introduced by the Government of India, enabling individuals to invest part of their income to build a retirement nest egg.
Key Features:
- NPS has two tiers: Tier I (non-withdrawable) and Tier II (withdrawable).
- Offers a range of investment options, including equity, government securities, and corporate bonds.
- Contributions to Tier I accounts qualify for tax deductions under Sections 80C and 80CCD(1B).
- NPS accounts are portable, allowing transfer across employers and locations.
- Partial withdrawals from Tier II accounts are allowed for specific needs.
- Upon retirement, a portion of the corpus is used to purchase an annuity, providing regular pension income.
- Returns in NPS are market-linked, with potential for higher earnings compared to traditional savings schemes.
Unit Linked Insurance Plans (ULIPs)
If you’re looking for a product that combines life insurance with investment opportunities, this is the best option. Part of your premium funds the life insurance coverage, while the remaining portion is invested in various market-linked funds.
Key Features:
- Combines life insurance protection with investment growth potential.
- Offers a choice of equity, debt, or balanced funds based on your risk tolerance.
- Eligible for tax deductions under Section 80C of the Income Tax Act.
- Allows flexibility to switch between different funds to adapt to market conditions.
- Some ULIPs offer partial withdrawals after a specific lock-in period.
- Additional investments can be made through top-up premium payments.
- Best suited for investment periods of 5–10 years or longer.
What To Look Out for When Choosing a Savings Plan
Unlike investing, savings schemes are designed to provide modest returns but with the guarantee that you will not lose money.
The plans are typically disconnected from the financial market, so even if stocks take a hit, your money will be safe. However, it also means you will not make it rich if a stock explodes in value. If you’re interested in higher-risk, higher-reward money accounts, you can look into getting an investment portfolio.
Choosing government-backed accounts means that your money is guaranteed safe and will not disappear, since the financial institution you’re entrusting with your money will always be around.
Additionally, government-backed savings schemes typically qualify for tax benefits under the Income Tax Act and other legislation, creating an added layer of savings for you.
When you apply for savings schemes, especially non-government ones, be sure to investigate the individual plan you are applying for to make sure you understand all the terms and conditions.
If you choose a plan that requires monthly payments, you also want to make sure that the amount you must commit fits within the budget for your living expenses; going into debt to put money into savings is counterintuitive and you will likely end up paying more in debt interest than what you gain in savings interest.
Utilizing a savings plan is one of the best money choices you can make, so be sure to choose wisely and secure a future for your money!
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