Is Saving Plan Bad?

Is saving plans all that bad?

Hi my name is Ka Hoe and I’m the founder of J Advisory. So, what is saving plan? The saving plan that I’m referring to here is those that are marketed and sold from the insurance companies, right?

“Many of us have stigma of how it was marketed & sold”

So, I guess one of the reason why all of us felt so negative about savings plan is mainly because of how it has been marketed. A lot of people I’m sure that you can relate that many of us been marketed these type of saving plans with a false type of information like how we can generate five to six percent return per year.

“Did you know that a lot of consumer did not know the 5-6% return promise, was calculated on the sum assured & not on the savings amount”

But many of us didn’t know that it’s actually based on the sum assured rather than the amount invested. So I just want to make a video here because I’ve gotten ask a few times in terms of right now, the fixed deposit rate has been so low, right? Should we consider buying savings plan?

“Saving Plans take to long to mature, if you don’t fulfill the whole lock in period, you could lose more than you gain”

Here’s my thought right. Basically there is two reason why I personally didn’t like the type of savings plan that was marketed before. No 1 (Firstly) was because it is too long of a period. I mean it takes too long to pay out the maturity benefit and is also too long for us to get back the money. In case if you couldn’t fulfill the whole 20-year or 30-year period basically will forfeit all of the money that we put in then actually reaping the rewards of the bonuses and interest.

The second reason is because when you really know how to calculate the interest of a saving plan or the return of a saving plan, you realized that a lot of times we see that the fixed deposit rate can actually get a higher return than a saving plan, right? So with these two reason, hence, that’s why I wasn’t in favor of that, but I guess what I’m trying to say here is that we all need to keep an open mind, especially when things are constantly changing, right?

“We constantly have to keep an open mind for investment opportunities”

And the reason why I say that is because if I didn’t keep an open mind, I wouldn’t stumble upon saving plan that can be attractive. So let me share with you our Singapore experience. Did you know that Singapore basically saving plan is something heavily favorable. Let me share with you why?

“Did you know our Singapore neighbours love to buy saving plans?”

Over in Singapore, their fixed deposit rate is at an all-time low because they are similar to the US fixed deposit rate. So in the US I think some of the banks are actually charging customer for them putting money in the bank. And Singapore is following them and their fixed deposit rate can be as low as 0.25%, right?

So when you have a savings plan, which gives an average return of 2% per year, that is actually something more interesting to consider. Hence, that is why a lot of people don’t mind putting money in savings plan in Singapore. And in my course of my 12 years (practising), did you know that saving plans can have also short maturity terms?

“The shortest maturity period I have seen for saving plans is 2 years, WoW!”

I’ve seen the shortest so far it matures after two years. So, I guess that’s the reason why, now we could consider putting money into the savings plan. But only if you truly understand, what is the pro and cons and knowing the actual calculation of the return rather than being sold or marketed wrongly. So let me know whether you agree or disagree. Share with me in the comment section. Take care, guys.

Photo Credit – financetopup