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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.
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36 comments:
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.
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.
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)
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.
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 :) ?
Hi,
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.
Regards,
MSAPersonalFinance
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 🙂
See:
SSB short term still more rewarding.
Hi MSAPF
Can you share which company you sold your policy to? Is it legal?
There are also some foreign banks that offer 1.8% or higher interest for 12 to 18 months.
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. :)
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
Hi FF,
Yes, it is important to remember that some money should not be used for investing. :)
See also:
Investors eat crusty bread with ink slowly for peace of mind.
Dear AK, it's me, the NSF from 2018. I would be almost done with my university soon :) gotten married early, and I am able to purchase a property with my wife soon, what are your thoughts on Resale vs Bto? I am aware of all the eligible grants that I am applicable for as my wife is a PR, lower grants, waiting time and MOP. Personally, I am not in a rush to find a place to stay as I have no kids at the moment
Hi FF,
Congratulations and good to hear from you. :)
Time does fly, doesn't it?
If you search "HDB" in my blog, you will get a rather long list of reading material. ;)
Here are a couple of blogs which you might find interesting:
1. Resale flat or BTO?
2. When the lease on my HDB flat ends.
Wishing you all the best. :)
Dear AK, it's me again, and I just got a flat and had a baby, realized I might have bitten off more than I can chew in terms of the property, any advice on increasing income in my early 20s
Hi FF,
Many people over consume when it comes to their homes.
Unless our homes are generating income for us, they are liabilities and not assets.
See:
Own a house and become poor?
If I had bought a 4 or 5 room HDB flat and could do with having only one bedroom, I would think of renting out 1 or 2 bedrooms.
In the current market, that would quite easily net $1K to $2K in extra income.
I don't like living with strangers but I would think of this as an interim measure until a time when I do not need the rental income.
Gambatte! :)
Yes, it's still under construction and I would be planning to rent out 2 rooms once it's completed, however I would need to increase my income to even get a loan to get the house
Hi FinanciallyFree,
When strengthening my finances, I always looked at expenses first.
If I was able to reduce expenses sufficiently, I might not need to increase my income to get a good result.
However, if I had already done that and still found it insufficient, I would have to think of ways to make more money.
At one time, I was holding 3 jobs, working 7 days a week.
That lasted for a few years.
I was doing it on my own steam but since you are married, perhaps, you could have an easier time if both you and your wife try to bring in extra income.
If you find yourself in a bind even having done all this, you really should talk to different lenders to try to find a solution.
Sometimes, when we have bitten off more than we can chew, it might not be a bad idea to spit it out to avoid choking.
Dear AK, really appreciate your advice, I am currently working two jobs, and my personal expense is at the lower end, around $1000 a month, what is troublesome is the amount of income that is required to acquire the loan, ie 16k household income
Hi FinanciallyFree,
Needs $16K in monthly household income to get a loan?
Sounds like a very expensive property you are buying.
Like I said, I would reconsider if I have bitten off more than I could chew.
Might have to spit it out. -.-"
Thank you AK for the very sound advice, if I were to spit it out, I would amount close to 300k in lossess, not sure if I had read through that part correctly 😅
Hi FF,
$300K?
Sounds like you have opened a gigantic can of worms!
I hope that you manage to get that loan somehow if you really need this.
Or else, it's Hobson's choice.
The only other thing I can think of is to reduce the loan quantum and, maybe, lenders would be more agreeable then.
Would have to pay a larger deposit for the property in such an instance.
I would talk to potential lenders first to get their firm agreement in such an instance or else I might be throwing more money down the toilet.
All the best. :)
Hi AK, I have around 2-3 more years to build back my savings as I have emptied it out for the house down payment, so would need to review the amount that I would be able to loan by then, hopefully income would increase and hit 16k by then
Hi FF,
Hope things turn out well for you.
Also, must remember not to bite off more than you can chew in future. :)
Yes, should be able to have another 200k saved up by then based on my current savings rate, was a bit of an overestimation on my affordability
Hi FF,
You might want to start talking to the lenders first about your plan to see what they say.
Don't want to be disappointed or get a nasty surprise when you have another $200K saved up when the time comes.
Thanks for the sound advice AK, I am looking to see if investments have to be compromised when the time comes as well
Hi FF,
Crossing fingers for you. :)
Hello AK, it's me again, just an update, this time, have my 2nd child coming along and the house would be completed earlier than expected, next year instead of in 2026. However, got a windfall from Income shares and my US shares (PLTR), do you think it's a good time to let go of all my shares and play it safe as my house reaches close to TOP ?
Hi FF,
Congratulations! :D
I can only offer you someone else's wisdom.
Don't risk what we need for what we don't need.
Warren Buffett said this. :)
Understand that it would be better if there is certainty, was thinking of letting go of the the shares via selling covered call, would you think it would be a good move?
Hi FF,
This is where I avoid giving a "yes" or "no" answer. ;)
It is entirely up to you if you want to trade options or anything for that matter.
Okay, thanks for your wisdom Sir :) was thinking this is a good way to exit the market as well if the price do hit, would just let go of my position and not roll the calls
Thank you for your advice, i have gotten around 220k in terms of all my cash now, possibly can get 250k by next year June
Hi FF,
Peace of mind is priceless especially when it comes to the roof over our heads. Congratulations! :)
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