Are you saving for a dream house, your child's education or perhaps your own retirement? Rather than rely on your savings account, you may instead want to consider alternatives such as a fixed deposit or an endowment policy.
Used for saving purposes, both fixed deposits and endowment policies offers higher rate of returns than the typical savings account. However, do you know the differences between the two? While they can both be used for the intention of accumulating savings, they differ in features such as protection and term duration. These differences thus make fixed deposits and endowment policies suitable for different purposes and therefore cannot be compared with one another.
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#1 Determine your saving goals
Before deciding on the saving strategy to adopt, it is important that you first determine your financial and/or saving goals.
As written in our previous article "Are Financial Disasters Your Thing? Here's 4 Mistakes You Must Avoid", one of the biggest mistake that you can make with your finances is the lack of consistent savings. This is because planning for your finances and knowing how much you intend to save will ensure that you have an emergency fund and are adequately prepared for future financial obligations. This also allows you to establish your current saving shortfall which could then help to determine whether to use a fixed deposit or an endowment policy.
(See "Is Your CPF The Ultimate Piggy Bank?")
#2 For short term saving goals
While both fixed deposit and endowment policies can help you to achieve your saving goal, they differ in tenure terms thus making them appropriate to be used for different purposes. For instance, shorter tenures are offered for fixed deposits with terms generally ranging from 1 to 36 months. As such, this makes them suitable to be used for achieving short term saving goals as there is the flexibility of choosing your desired time frame. Examples of these short term goals could be to provide for a child that is currently in university or for your upcoming housing payments. Furthermore, with the premature withdrawal penalty being relatively low, fixed deposits thus offers liquidity as your funds can be withdrawn should the need arise.
(See "Why Cheapest Isn't The Best (Policy)")
#3 For long term saving goals
Endowment policies on the other hand, are often seen as a disciplined way to save. With its cash values made up of guaranteed and non-guaranteed components, endowment policies offer customers the possibility of higher rate of returns. A minimum tenure of 10 years, endowment policies are commonly used for long term saving goals. Some examples of these may include saving for your child's future education, your retirement or even for your dream house.
As explained in "How Much Does It Cost To Live In Singapore 30 Years From Now?", the cost of living 30 years from now is projected to be more than twice of our current expenses. Therefore, to ensure that we are prepared for the rising cost of living, it is important that we are aware of our finances and have in place adequate financial and saving plans.
(See "Average Singaporeans Need $1 Million Coverage. Have You Had Yours?")
#4 For a peace of mind
As a life insurance, endowment policies offer a combination of both protection and saving features. This allows for add-ons such as a waiver of premium rider to be attached to the endowment policy. With this rider, any future obligations for premium payments will be waived in the event that the life insured becomes seriously ill or disabled. Therefore, this ensures that the plan does not lapse and is carried out until maturity. This could give you a peace of mind knowing that your saving goals can still be achieved even if faced with any unexpected circumstances.
(See "Your Must-Have Guide To Term Insurance")
How FSMOne can help you get on track
Our team of friendly advisers are able to help you review your financial objectives, long term commitments, and offer you investment and insurance advice specific to your needs. If you would like assistance in reviewing your financial and protection portfolio, or simply to get a quote for an insurance plan, you can contact our advisers at advisory@fundsupermart.com.
Available Products on FSMOne Insurance |
Term Life, Whole Life, Critical Illness, Annuity, Health, Endowment from Manulife, NTUC Income and Tokio Marine Life Insurance *Please check with our advisory team if the product you want is available on FSMOne Insurance |
Interested to learn more? Check out these articles:
What You Didn't Know About Whole Life Policies
5 Amazing Countries You Can (Almost...) Retire With Your CPF
MRTA: The Difference Between Keeping or Losing A Home
5 Simple Steps on Getting Your Life Protection Coverage Right
What Wikipedia Can't Tell You About Your Child's University Education