Savings

Savings insurance is designed to help individuals save and accumulate wealth over a specific period while providing insurance coverage in the event of unforeseen circumstances. They are structured in such a manner that policyholders can acquire a regular saving habit to build wealth and achieve financial goals in life.

1. Encourages Financial Discipline: Regular premium payments for savings insurance plans can function as a form of forced savings, fostering financial discipline and commitment towards long-term financial goals.
2. Low-Risk Investment: The summed up guaranteed returns tend to be higher than fixed deposits despite having relatively lower investment risk as compared to direct investment to assets in financial markets.
3. Insurance Coverage: Unlike savings accounts in bank, savings insurance provides insurance coverage, offering protection to policyholders or their beneficiaries in specific events covered by the policy, such as death, disability, or critical illness.
4. Tax Benefits: In Singapore, savings insurance plans may offer tax benefits such as tax deductions on premiums paid or tax-free payouts upon maturity or under specific conditions, making them more tax-efficient compared to other savings vehicles.
5. Flexibility: Savings insurance plans may offer flexibility in terms of premium payment terms, coverage options, additional riders (e.g. critical illness, disability), and mode of payment (lump sum or regular payments).

It is recommended to follow the 50/30/20 rule, it is a straightforward and easy approach in allocating your monthly income to the various categories as follows:

1. 50% on needs: Needs are expenses which you find necessary for survival, e.g. Food, Utilities, Transportation, Insurance, etc.
2. 30% on wants: Wants are expenses which are spent on enjoyment, e.g. Holiday, Shopping, Games, Gifts, etc.
3. 20% on savings: The final 20% should be saved up as an emergency fund for rainy days.

Other than savings and expenses, it is equally important to be on the lookout for your debts. If your total debt is less than 50% of your total assets, you are considered financially healthy.

There are some factors to bear in mind when deciding to purchase a savings insurance plan.

1. Financial Targets: Identify your short-term and long-term goals.
2. Premium commitment: Ensure that the policy you are considering is within what you can afford in a long run.

It is advisable to do necessary research to find alternatives that provide comparable benefits and weigh each option's advantages and disadvantages. Speak to a trusted Financial Advisor Representative who can assist you in making a sound purchase decision.