Are savings or endowment plans essential? - Seedly
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Anonymous

Asked on 25 Jun 2020

Are savings or endowment plans essential?

I understand they serve to hedge inflation, force discipline in savings. But if i am disciplined in savings can i do without it ? When will I use savings/endowment plans?

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Hey there!

It depends on how you define what essential is. If you mean hedging against inflation, you might want to consider making your money work for you apart from endowment and saving plans. And ultimately, you need to evaluate your life stage and see whether these plans meet your needs.

Endowment and savings allow you to get back some interest while (usually) keeping your capital guaranteed (do check the policy T&C for that though). Its an alternative for people who may not want to invest due to the volatility associated with investments.

It's also a great tool for your guaranteed long term needs since it probably has a guaranteed capital portion to it. There are plenty of endowment and savings, ranging from long term to short term, as well as endowments that allow you to allocate the policy's ownership to your children in the future. Do explore your options. All the best!

Financial planning is an integral part of life. You can reach me here to find out more.

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CL

Chuan lee

Level 6. Master

Updated on 06 Jul 2020

Would assume you would rather invest than to put too much into savings.

For me, my use case for endowment plan is for when the high yield accounts are coming down just like now!

Most of my emergency money will be parked in flexible endowment plan like singlife, elastiq or dash easy earn to hedge against inflation.

I have maxed out singlife and currently looking into elastiq next month.

On why elastiq(1.8%) rather than easyearn(2%):

http://seedly.sg/questions/should-i-opt-for-dash-easyearn-or-elastiq-for-savings?utm_source=app&utm_source=question_share&utm_medium=internal

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Hi Anon,

It depends on what you conisder essential. The benefit of endowment plans is as what you just said, they hedge against inflation. Due to the nature of them being a participating policy, where the insurer will invest on your behalf and give you the returns of investments in the form of annual bonuses.

Compared to saving in the bank, where most of the returns of investments are actually given back to themselves for operational cost and other things. I think if you have the discipline to save, saving in both instruments are beneficial for you.

The good thing about saving in the bank is that it gives you liquidity; you have the option to draw the money out as and when you need. This is definitely something no endowment plan is able to provide.

I have spoken about the better returns from endowment plans, and just to highlight that they are also a lower-risk form of investment as compared to ILPs and investment products. So if you are risk-averse as a person, endowment plans might be a more comfortable instrument for you to invest your money.

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S

SkyFP.com

Level 4. Prodigy

Answered on 30 Jun 2020

Endowment serves to guarantee the amount of money you will need in time to come, while hedging against risks such as health from reaching the target.

There are various instruments that serves differing needs and it is important to choose the right one.

https://www.skyfp.com/2016/02/endowment-safety-net-savings-retirement/

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Jarod

Jarod

Level 2. Rookie

Answered on 30 Jun 2020

Don't think so .. I think it's mainly for legacy purpose? :)

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SL Sae

SL Sae

Level 2. Rookie

Updated on 27 Jun 2020

You're right. You don't need to use an endowment plan to enforce disciplined saving if you're already disciplined enough to save on a regular basis.

But do you know that endowment plans are also known as insurance saving plans? With the insurance element, the endowment plan can provide the assurance that if a catastrophic event (e.g. critical illness) happens, your saving will not be interrupted because the insurance company will continue to pay the premium for you. This is not possible if you're saving on your own. So, if having this added level of assurance is important to you, then endowment plans will have a place in your financial plan.

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Jarod
Jarod

30 Jun 2020

So this is not the saving plan but for your protection .. I think it’s better to get a pure saving plan without any rider added?
SL Sae
SL Sae

07 Jul 2020

The main objective of an endowment plan is to save for a fixed number of years, and with a particular goal in mind. Even without adding a rider, the endowment plan would still cover death because it is underwritten by insurance companies. As such, a part of the premium goes towards insurance coverage. In conclusion, insurance saving plans offer some protection while you save but it's primary aim is not protection.
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Frankie Rappaport

Frankie Rappaport

Level 10. Unicorn

Answered on 25 Jun 2020

You surely can do without them. Even when they lead to discipline, they only raise the costs. But to reduce them is essential.

You can invest all by Yourself, with a cheap online broker and passive indexing ETFs.

How I do it, You could read here:

https://seedly.sg/questions/what-is-your-general-investing-philosophy-strategy

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Jarod
Jarod

30 Jun 2020

Which ETF are you buying now? Do you mind to share ..?
Frankie Rappaport
Frankie Rappaport

30 Jun 2020

Hi dear Jarod, I gave (my) selection in the link above. Formally what a I wrote is what I for myself bought or would buy, though I'm positive on all the given ETFs, I cannot recommend here anything. indirectly it is, of course, still a recommendation somehow). When You now ask what I would recommend I should answer VUSD or a cheap and large MSCI World ETF, or both, and 5-10% physical gold. When you ask me what I am buying NOW, I first must say, that there is no 'now' for me but an 'always' (when I have free money, f.ex. from salary), independent of any crises or market prices. So, what I constantly would like to buy (but this is tech sectors and thus risky, not really recommendable to other persons because of the risks involved): VGT, QQQ, SOXX, FDN, SKYY, XBI, FBT, ARKG, IHI. (and I surely would buy them for holding them ultra-longterm, no intention to sell for decades). bye bye. good luck ! (better think of VUSD etc. !)
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N

Ninja

Level 7. Grand Master

Answered on 25 Jun 2020

I don’t see how it’s a forced discipline in savings. You already have a locked savings plan which is your cpf, why get more locked plans..even those that provide cash back, it is still your own money.

Personally I don’t use saving plans and my etf are still more stable. I can withdraw from it anytime i want and over a long period of time i get to keep all gains

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In short no, savings or endowment plans are not essential. Instead, what's essential is your ability to use the right financial instruments to grow your wealth and meet your goals.

Generally for an endowment policy, your premium is invested into the insurer's participating fund. Accordingly, you will share the profits while being protected from the downside of investing your money directly into the market.

More Details:

What is a Participating Fund?

An endowment policy may be used for various puposes. For instance, a step-up annuity gives you higher guaranteed coupon over time. In this situation, the guaranteed step-up feature hedges against inflation. Additionally, you will receive non-guaranteed bonuses as well.

More Details:

Reversionary Bonus and Terminal Bonus Singapore

In another example, an endowment policy is commonly used for education planning. This is usually in direct contrast to investing for a number of reasons, e.g. non-guaranteed returns. Moreover, it is more straightforward to submit a nomination than to draft a Will for investment.

Overall, there are many reasons for using an endowment policies and with limited time, I can only give a brief introduction. In any case, you need to know your needs in order to assess whether an endowment policy is suitable.

I share quality content on estate planning and financial planning here.

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may

25 Jun 2020

In the west nobody sells endowment policies anymore because nobody is buying them. I am surprise to find ppl being recommended to buy them here
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