Should you convert your savings into endowment plans?
After all these discussions on different types of savings, let’s now come back to the fundamental question of this article: Should you be converting your savings into endowment plans?
Often, without the right knowledge, people choose to keep all their savings in the banks or fixed deposits which may not be effective especially for longer-term goals. For instance, instead of investing or setting up an endowment plan that gives us better returns over the long run, saving up with purely Tier 1 instruments will give us too much liquidity to be useful, and cost us more for not working hard enough with our money. Therefore, choosing the right instrument that aligns with your time horizon and goals paves way for an easier route to save up eventually.
Here are a few reasons why you should consider adding endowment plans into your portfolio:
A. Potentially higher returns than a standard bank account
Many endowment plans offer guaranteed basic returns that are comparable to a standard savings account, not to mention that there also additional non-guaranteed return portion which allows policyholders to directly benefit from the performance of the insurer’s investment portfolio. For those who may yet to have specific goals that you are saving up for, an endowment plan with infinite maturity date is a perfect fit for you as it allows you to save as you go. Should you require some funds down the road, a portion of the portfolio will be made available for withdrawal after a certain period.
B. A forced discipline can be a great help to you
To save money regularly can be boring and challenging, especially when the time span is long, as we need to deal with more distractions along the way. Having a savings plan ensures that you diligently save up for goals first and prioritize it over upgrading to a new phone or going for that holiday. This doesn’t mean that we should place our enjoyment last, however, by saving first, we have greater peace of mind when it comes to our lifestyle enjoyments!
C. You are saving for a longer term with a clear intention
For instance, you may be saving for your dream home, future business start-up, your child’s education, or even for early retirement! A goal without a plan will bring you nowhere. Thus, dedicating yourself into one endowment plan that can specifically help you achieve that goal means one step closer from hitting it.
D. Protection against unforeseen circumstances
Saving money in the bank will not guarantee you the realization of your goals if something were to happen to you along the way. However, by diversifying into endowment plans, our goals will be safeguarded as we have the right to call for the premium waiver option, should critical illness or disability occur to us. The policy premium will then be fully paid off by the insurer, keeping the policy alive until the maturity date where you will then be able to receive the full maturity amount.