Thursday, 22 February 2018

Savings plan - Yes or No

Savings/Endowment plans, what are they? Do they help in growing your wealth? To my mum, YES IT DOES. My mum is an ardent fan of savings and endowment plans because she has been purchasing them throughout her life. She told me that the feeling or saving each month sucks but when after a few years and you are able to have a substantial amount being returned to you, you will feel damn SHIOK. My mum spent her first lump sum savings on an overseas trip with my aunt as they purchased the plan together.


In my mum's generation, not many were aware of being financially savvy, she mostly listened to her friend who was a financial advisor and would recommend her products to buy. So during 2015, I started my gap year after finishing my polytechnic studies hence my mum knew about my salary and wanted to cultivate a savings culture in me. My cousin who became a full-time financial consultant recommended me an endowment plan however, I failed the checkup that was required as I have a pre-existing condition. My mum was upset and found NTUC income providing a plan with no prior checks required, the plan that I eventually signed up for was NTUC's RevoSecure.

At that time, I havent got into investing yet and so just followed my mum's instructions to sign up for the plan. However, when I went back to my studies in mid 2016, the burden of paying the premiums were rather heavy and I knew that this was not going to provide a satisfactory return. I discussed with my mum about it and she said just to continue so I did just that to not make her upset. In the end, I found that she just wanted me to start saving and that if anytime I faced difficulty in paying the premiums, she would definitely help me.

Over the past one year, I think it is also good to have a savings plan because if I did not have one, I would have placed all these money into the stock market. Maybe I would have profit more but I understand now why my mum wanted me to get one. It is kinda like a forced savings and the surrender value would prevent you from surrendering early. Also because I have started giving tuition part-time from Sep 2017, so my income can cover this payment and my expenses with minimal savings monthly so as of now, I am coping well with this savings plan.

So the premium is $319.20 each month and it is a pay 5 years, hold 10 years plan. I started in 2015 when I was 21 so it will be paid out when I am 31 which will be 2025. WOW, what have I gotten myself into! Locking all my money in this. So below shows the breakdown of the premiums I pay and the 'expected' returns.

My savings plan
Currently, I am paying the monthly premiums of $319.80 I have taken notice that the yearly premiums are lower in value than the monthly premiums so I might change to yearly premiums.

As you can see from the second table which is mainly about the surrender value, it is not worth to surrender it until the maturity date. If I were to surrender it now which will be year 2, I would only get back a guaranteed of $3600 when I would have paid $7380. So I guess I will pay it until I am 26 years old and just let it sit until I become 31 years old in year 2026.





1 comment:

  1. Hi SGInvestmentlady,

    Although I'm not an advocate for such plans, but there's always 2 side to a coin. Forced savings is good too! Every product works differently and they are wired to each persons' needs.

    The only thing to be wary is to not get the incorrect product! hehe

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