Asked by Anonymous

What do the community think about having a Long term endowment plan e.g 20 years for someone who just started working? What are the pros and cons? Thanks in advance!

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    • Soon Xiaohui
      Soon Xiaohui
      32 Answers, 102 Upvotes
      Answered on 28 Aug 2018

      Hello There,

      To be honest, it is depending on what is the purpose/objective for the plan? There is many alternative options. And premium term affects the overall ROI of the plans. Let me put this in a simple way: Paying a 20 years premium does not guarantee you will have a good return as every plan is designed & calculated differently. Sometime a short term premium (5 years premium) with a long duration (maybe 20 to 25 years of holding period) can give a much higher ROI however this is solely depending on your budget.

      But for someone who just started working, I would recommend you to look into your cash flow (expense), learn on how to manage it, create an emergency funds & saving up in alternate bank accounts (especially if you do not have a saving habit, time to build the habit). You may put partial of your saving into SSB while you learn more about endowment, investment.

      Please do not hurry and commit into a plan without understand its nature. If you really wish to speak privately, do feel free to pm via facebook~

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    • Alan Kor
      Alan Kor

      Top Contributor (Jan)

      63 Answers, 103 Upvotes
      Answered on 24 Aug 2018

      you will be locking up your cashflow for very long time for mediocre returns. are you comfortable with it?

      compare the returns with ssb avg 2%+ for 10 yrs, with 1 month flexibility

      dont rush to lock in your money without comparison

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    Jin Shun Chia
    Jin Shun Chia, Senior Financial Consultant at Prudential
    39 Answers, 62 Upvotes
    20 Aug 2018

    Long term endowment (or commonly called savings) plan works to make you disciplined in savings. For a fixed plan, i.e. can't withdraw during the policy term, it ensures you have a sum of money to use for at the end of the policy term. For a flexible plan, i.e. you have option to withdraw money during the policy term, it allows you to have some spare cash at any point in time.

    Just to share I started my endowment plan when I was schooling. When I graduated in end 2008, it was bad job market. It took me 3 months to find a job (when others before and after me already have offer when they graduate). During that time I exhausted my bank savings but luckily I had endowment plan to withdraw cash to tide over things for a couple of months before the paycheck comes in.

    Sometimes you never know when you need that extra cash - having a long term savings plan ensure that you'll have something somewhere along the line! The pros is definitely there. But be ware not to over-commit and bite off more than you can chew. You won't want to get an endowment plan that over stretch your financial capability!

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