As a 20-year old and having just started your career, you may want to spend all of your salaries on a new gadget or a vacation with friends. While there is nothing wrong with life’s simple pleasures, it is also essential to save some for your future and do so as early in your life, preferably in your 20s and 30s.
Another belief that could hamper your inclination to start saving is because your income doesn’t fall into the taxable category;you do not consider putting your money into income tax saving options. After all, shouldn’t you be able to enjoy your life just a little before the responsibilities take over?
The answer is, you should. However, spending too much money at a young age can quickly turn into wasteful spending towards trivial pursuits, while ignoring essential things such as maximizing your savings for the rainy days or your retirement.
Besides, it is also possible that you can end up spending more than you can earn, thus, starting a dangerous cycle of the debt trap. To avoid any such instances, you should start investing early – to inculcate financial discipline at a young age and secure your retirement. Here’s why investing in income tax saving options under the existing Indian tax system at a young age is such a good idea. Take a look.
1. Lesser Tax Liability
Your income may not be too significant now. With time, however, it is bound to increase as you thrive in your career. You need to remember that you don’t have to advocate a certain percentage of your salary. The point is only to start saving first. You don’t have to explore best investment plan.
Even something as simple as term insurance will give you the benefit of tax saving under the prevalent Indian tax system. You can start small and then gradually build your way up. However, don’t think that income tax saving options are only meant to save you tax. They are also investments that will secure your financial wellbeing in the long run, apart from reducing your tax liability.
2. Invest in a Secure Future
When you start investing at an early age, you may achieve financial stability sooner in life than most of your peers. It might seem inconsequential at first, but when you start saving for retirement in the 20s and 30s, you can make your future more financially secure. You will reach the retirement age someday, and then you will need your savings to support your family and your lifestyles.
At a young age, you have the time and resources to support your post-retirement income with tax saving investment options such as term insurance, health insurance and retirement plans.
Besides, as a young investor, you have the internet at your disposal to explore different investment options such as Unit Linked Insurance Plans, and term insurance. When you self-research your investment options, you feel more confident about these financial instruments and can diversify your investment portfolio for all-around protectionas the time progresses.
3. Lower Cost of Life Insurance
The whole purpose of buying term insurance is to provide financial cover to your family when you are not around anymore. But did you know that it is most cost-effective when purchased at an early age?
When you are young, you are healthy. Therefore, your premiums are low because the insurance company calculates the risk involved depending upon your age and medical condition. Besides, we are living in stressful times, and lifestyle disorders creep up much sooner than we are prepared to deal with them. If diagnosed with a premedical condition at the time of buying the policy, you will end up paying a much higher premium, if you are not rejected at all.
At the same time, term insurance policy is meant to reduce your existing as well as future liabilities that tend to go down with age. So it makes more sense that you buy younger.
4. Health Insurance Coverage at Best Rates
The premium paid towards health insurance is eligible for tax deduction under Section 80D of the Income Tax Act. The benefit is available for you if you pay the premiums for yourself, spouse, children, and parents. Therefore, the premiums you are paying for health insurance can reduce your tax liability. But if you buy health insurance for yourself in your 20s and 30s, you can also save significantly on the premium itself because you may not have an illness at a young age.
Term insurance plans and such instruments help secure your future in the long-run and saving you money in taxes in the short-run. When purchasing the term insurance, it is advisable to compare different plans online. Online term plans from insurers such as Max Life Insurance help you make a sound investment decision by comparing different policies that offer maximum benefits at low-cost premiums. These plans make your purchase hassle-free and well-informed.