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Should NSF invest $30k savings and pay $4k a year for insurance?

Friday, September 21, 2018

Reader says...

I am a fairly new reader on your blog.

I am thankful that you are sharing your knowledge, and at the same time I have a few questions that I would like to seek your opinion on.

I am currently serving NS.

I have been working part time since 18 and have a saved up 30K which I am planning to use for my university fee (Private).

I am not sure whether I should invest with the amount of money that I currently have or just leave it untouched as it is money that I would require in the coming years (approx.1-2 years).

I am also currently spending $4000 a year on an insurance saving plan (25 year plan, 10 years of paying).

I will have to commit to it for another 8 years before I can stop paying, after reading up I have found out that it is not a wise decision to continue, however cancelling the plan now would only ensure me a value of 1k++ returned.

Thus I am unsure if I should or should not continue with it as the whole plan last for 25 years.

AK says...

Welcome to my blog. 🙂

I will never invest with money which I will need in the near future.

As for insurance, my preference is to buy term and invest the rest.

However, an insurance savings plan can be good for people who do not want to bother with investing themselves but would rather let someone else do it for them.

(Then, you are basically treating it as a pseudo bond component of your investment portfolio.)

You decide. 😉

Related posts:
1. Invest with peace of mind.
2. Financial security plain and simple.


AK71 said...

Kor Chin Wee says...
$4k a year for next 8 years = $32k. From what I know of insurance savings plans, there is a guaranteed and non- guaranteed portion and it is usually the case where guaranteed will be less than capital put in.

Moreover, the end date of the plan is up to the market so if market happen to perform badly will likely affect.

Plus, it also locks up the money and there is no liquidity. For this kind of Low returns, might as well put in Singapore savings bond for that same number of years.

Early termination may lose $1k plus but another $32k is at stake. If he regrets it further down the road will lose much more.

Shld try to split insurance and investments because insurance products have wrapper costs that compound as well.

AK71 said...

Hogan Yeo says...
Hi NSF, go n compute ur remaining 8yrs of 4k p.a if put to stock can cover back ur losses if u terminate the plan early or not. If yes juz cancel.

I cancelled all my saving plans tt paid for 2 to 3 yrs after knowing about stocks.

AK71 said...

Jieren Azrael Zheng says...
I also terminated my ILP recently losing 43% of premiums paid, about 4.4k but at least now I have more funds for overseas diversification (which is the purpose of the ILP initially)

Henry said...

I think the NSF should just put the money in SSB and sleep peacefully because he will need the money soon for his education. The last thing he wants is when he needs the money, the stock market crash, and he has to sell his investment at a loss. Just my 2 cents.

Henry said...

I have savings plans and whole life policy bought when I first started working. Over the long long term (more than 20 years), they are not too bad, generating returns of 3%+ per annum based on the cash value. I am still paying the premiums because the returns per year is 70 to 100% of my annual premium paid the last few years. I am quite blur with insurance and glad that I did not buy any ILP after reading so many negative comments. I treat them as my bond (long term savings) component which I will surrender the policies when I need the money or when the return starts to become unattractive. Not sure if I did it correctly :) ?

MSAPersonalFinance said...

If you are looking at terminating the policy, you can consider selling it instead. I sold my NTUC Revosave policy to a company which offers me 5% higher than the surrender value.


AK71 said...

Reader says...
Hello, thanks for replying, would singapore saving bonds be an alternative for me to park the money in as i still have 1 and a half year in NS

AK says...
SSB is a legit alternative 🙂

AK71 said...

SSB short term still more rewarding.

Henry said...

Can you share which company you sold your policy to? Is it legal?

Henry said...

There are also some foreign banks that offer 1.8% or higher interest for 12 to 18 months.

AK71 said...

Hi Henry,

I encourage discussion and debate but I do not allow advertising in the comments section.

I published MSA's comment because it did not mention any specific company or I would have deleted it.

There are companies which will offer to buy life insurance policies in Singapore and I have been approached by a couple of them to promote their services in the past.

However, as I did not wish to be involved in such transactions, I declined.

You can do a search online and I am sure you will find these companies listed. :)

FinanciallyFree said...

Thanks for the kind advice, I have definitely applied what you have taught me and would not be investing money that I would need in near future

AK71 said...

Hi FF,

Yes, it is important to remember that some money should not be used for investing. :)

See also:
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