In financial planning, the terms SIP, HIP, and TIP are often quoted. SIP stands for Systematic Investment Plan, HIP stands for Health Insurance Plan, and TIP stands for Term Insurance Plan. Here, we explain the utility of these three...

Why Financial Planning Is Needed
Life has big goals. First, a luxurious house, marriage, children, then children's education, and retirement. The foundation for all these plans is laid from your first job or the beginning of your income. Building a strong investment foundation by the age of 30 will provide you with long-term growth, security, and peace of mind. This requires effort from the beginning.

Start SIP First
We're assuming you're familiar with a Systematic Investment Plan (SIP). It helps your money grow rapidly over the long term. By investing a fixed amount each month, you reap the benefits of rupee-cost averaging and compounding. The history of SIPs shows that staying invested in Indian equities over the long term has resulted in double-digit annual growth on average. Risk reduces over time. Once a SIP is initiated, you can also opt for a Step-Up SIP. Increasing the amount by 5–10% every year creates a much larger corpus than a simple SIP.

Take Term Insurance (TIP)
Taking a term insurance plan is crucial to protect your income. It's recommended to take it out at age 30 because premiums are lowest at this age. At this time, you can easily lock in long-term protection (for 20–30 years). The question arises: how much coverage should you take out? It should generally be 10–15 times your annual income. Also, consider loans and future needs. If something untoward happens to you, your family's expenses and your children's dreams are protected. But be careful, only opt for a pure term plan (avoid ULIPs or add-ons with returns). Also, choose a cover with an adequate amount and a tenure that covers your children's education and your working years.

HIP to protect against rising medical expenses
Once you've arranged for SIPs and TIPs, it's time to consider a health insurance plan, or HIP. Once you've arranged for both, HIP is also essential. Medical inflation in India is rising by 10–12% annually. Statistics show that currently, people pay almost half of India's total medical expenses out of pocket. Without insurance, a large hospital bill can wipe out years of savings. Therefore, opt for a good family floater plan that includes restoration benefits, no-claim bonuses, and daycare cover. Be sure to add a super top-up later as your income increases. It's recommended to take it as early as possible to keep premiums low, and the waiting period ends quickly.

Why is this important?
SIPs, HIPs, and TIPs are crucial for everyday financial journeys. SIPs: Create wealth for your dreams. TIPs: Protect those dreams if your income suddenly stops. HIPs: Prevent medical expenses from depleting your savings. Additionally, you should maintain a 3- to 6-month emergency fund and review the coverage amount annually.

Disclaimer: This content has been sourced and edited from Navbharat Times. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.