Thursday, December 08, 2005

Q&A: Financial Planning for the Young

Question: Should young adults think about financial planning, when their earning is still low?

Yes. Each person should save at least 10% of their earnings. This is very important, as jobs are uncertain. They may also need their saving to meet an unexpected payment, including a large medical bill, or when they lose their job.

Question: How should they invest their saving?

They should invest in a flexible saving plan that can give an attractive rate of return over several years. An investment-linked plan from NTUC Income is probably the best. It is more appropriate than a bank account or a traditional life insurance plan.

Question: Does this plan have high charges?

Most investment-linked plans have high charges. But you can choose a plan that invest 100% of your monthly savings immediately, and incur low charges.

Question: Does this plan provide insurance protection?

It is better for you to buy a decreasing term assurance. It provides high coverage at a low premium that remains fixed during the term.
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1 comment:

Tony said...

Thanks for the simple Q&A. My suggestions to add on:

Savings of 10% is simply not adequate. I would say 20%. Invest this 20% into various tools, such as the Combine fund offered by Income. Or if one have enough capital, set aside some money to invest directly in the open market. They key is: Diversify

Having save 20% for investment, one should also set aside about 5%-10% as liquid cash to deal with unforseen situations. Always keep a look out for good interest rate yet extremely liquid. Such as Esaver from Standard Chartered Bank.

Perhaps another 5%-10% on pure insurance coverage, to cover dread diseases or accident. Having meticulously compared similar products offered among all insurer in Singapore. I would say with confident you will get value for money insurance plan with Income.

My 2cts.

Disclaimer: I do not work for nor related to NTUC Income and Standard Chartered Bank.

December 08, 2005 5:02 PM

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