Saving tax and making investments can help young earners grow their wealth significantly. With some helpful tips, every young earner can build a huge financial corpus.
If you want to know what these tips are, then read this article.
Two of the most important things every young earner should know about are how to save tax and investment options. Saving taxes and making investments are crucial for building a significant financial corpus.
While these two factors are important, most people don’t have sufficient knowledge to make the right decisions. However, a few tips can help in lowering tax liability and earning returns based on the investments made.
Tax-Saving Tips for Young Earners
Understanding how to lower tax liability can help you to save on taxes. There are different investment instruments that can allow you to lower your tax liability-
- Buy Life Insurance
Life insurance provides the policyholder’s nominees with financial protection. The insurer can provide a sum assured to the nominees if the insured person passes away while the policy is active.
Apart from the life cover benefit, life insurance also offers tax benefits. The premiums paid to purchase term insurance can be claimed for tax deduction under Section 80C. The tax deduction limit is Rs. 1.5 Lakh.
- Buy Health Insurance
While life insurance provides financial protection in case of an unfortunate event, health insurance covers the medical expenses of the policyholder. Hence, health insurance is crucial for saving money as medical costs can get very expensive.
Health insurance also offers tax benefits. The premium paid to purchase a health insurance policy is eligible for tax deduction up to Rs. 25,000 under Section 80D. An individual can also claim a deduction of Rs. 50,000 if his/her parents are senior citizens. Their age needs to be above 60 years.
- Invest in ELSS
An equity linked savings scheme (ELSS) is a great option to earn good returns and avail tax deductions. It is a mutual fund that provides tax deduction under Section 80C.
Investment Tips for Young Earners
With the help of investments, a young earner will be able to build a significant financial corpus. This is because the more time an investor stays invested, the more money he/she can make.
Here are some tips that you should follow-
- Invest From an Early Age
It is recommended that working professionals should start investing as soon as they receive their first salary. This will allow them to stay invested for a longer duration. Hence, they can gain higher returns. Furthermore, young earners should opt for savings plans to allocate a part of their income towards savings.
- Take Higher Risk If You Can
By investing in high-risk investment options like stocks, you can gain higher returns. When you are younger, you can take higher risk with your investments to earn more returns. However, as you get older, your responsibilities will increase, and you might not have sufficient funds to make investments. Thus, you should consider opting for high-risk investment options. But make sure to research the investments before you start investing.
- Invest on a Regular Basis
While starting to invest from a young age is important, it is also crucial to keep investing regularly. Investing regularly can reduce the impact of market conditions.
Follow these Tips to Build a Great Financial Portfolio
In order to build a great financial portfolio, you need to understand how you can save on tax and know the investments that can help you earn higher returns.