Tan Kin Lian's Blog: Save for children (2)

Saturday, May 08, 2010

Save for children (2)

hi Mr Tan Kin Lian,

I have 2 children, 13 and 15 years old. I intend to buy them a insurance policy. I have read your FAQ. Can you tell me if I will buy endowment policy (saving insurance) from NTUC for my kids, is it good? I intend to spent $100 each for my children. Is there any other policy that you think is suitable to buy, can recommend me. I know very little about insurance.

REPLY
It is better to invest in a low cost investment fund. this is explained in my book, practical guide on financial planning. You can also read the relevant articles in my blog.

8 comments:

Anonymous said...: Stop wasting your money on your children. Are you adequately insured?
Are you insured for at least $800K?
Are you insured for critical illness of at least $300K assuming you need $5000 a month? If you are already insured the most sensible insurance for your kids are H&S medical insurance paid out of your CPF medisave. After having this, start a saving plan for your retirement with your children education fund as part of it.
After this, what about your spouse? Is she a housewife? She needs a critical illness and " guardian" replacement if she is not around. After having satisfied all THEN think of your children's insurance .If you are concerned about critical illness buy a term insurance which might cost less $100 total for all the 3 children for at $100K coverage each.
After this, it is save and save and invest because no one is lending you money to retire. No bank will loan you money to retire. Either you have or you don't..,. priority . One last tip. don't listen to insurance salesmen. Remember salesmen sell and they don't plan. If you engage a ntuc agent you are finished becuase they will sell you something you don't need but YOU WANT. Avoid trouble. There have been many cases of rotten product posted in this blog. Don't repeat their mistakes.THERE IS NO SUCH THING AS SAVING PLAN IN INSURANCE.Insurance is to manage your risk . Saving plan is for saving.. Separate them and you will have peace of mind.Why ntuc agents don't recommend you this strategy is becuase they earn peanuts from advising you this.They earn a lot of commission from SELLING you an insurance with 'saving'. Your nightmare begins when you get conned into it.
Well, Mr. Tan can't make the cow drink, right? Is is up to the cow.; May 08, 2010 7:51 PM
Unemployed said...: Your children depend on you for support, financialy.
Your ability to earn an income is priority, otherwise, paying for the premiums is impossible.

Once you do not have an income, how will you continue to service the premiums?

The kids will be approached by an insurance agent when the time comes, trust me.. then pass the same advice to them.

Did I hear you say "endowment'?
same thing lah.. how will you pay for it if you do not have an income?

Protect you own life first.. secure you own future money first.. dont worry, anything happen to you, ( if you have prepared a will ) will go to the kids and your spouse.
The kids are young and not likely to get long term health problems.

Its YOU that matters most. Think about it.; May 08, 2010 8:22 PM
Anonymous said...: First thing first, Mr. Are you insured in all the areas?
1. if you are NOT around do you leave enough for your kids and spouse to live their life from them?
2. If you kenna dread illness do you have enough critical illness insurance to protect and to replace the income lost for next 5 years?
3. do you enough disability income replacement insurance to last you till 65 years when you kenna disabled and cannot work but still alive.
If your answers to above is all YES then proceed to your spouse.
1. Is your spouse insured against illness? (assuming she is not working)
2.what if she disappears do you have enough money to 'replace' her to take of your kids and you during the adjustment period.
Next is your retirement. Start planning early by investing regularly in reasonable risky assets for higher return. Remember safe products are risky because they cannot meet your retirement needs.Don't invest in ntuc growth or sail unless you are already very rich and don't need to grow. Invest in their ILPs you are accumulating.
But first most important step is to engage a planner who is HONEST & COMPETENT to plan for you.
If you engage a salesman disguised as executive financial consultant you can say goodbye to your future.
The moment you engage him or her you can see smoke . Why? Do you know why they are known as executive financial consultant? It is because they SOLD( and NOT PLANNED) a lot of products with high commission. Ask their customers whether they are on their way to happy retirement or they still don't know what is happening.Ask...it is your right to competent and responsible financial planning.

PS. don't get conned into buying their education plan; May 08, 2010 10:40 PM
Anonymous said...: Hi Mr Tan,
I have bought and read your book on pratical guide on financial planning. I have decided to invest in a $10,000 saving which will be half of my total saving. That is because beside fixed deposit, i can't find another way to grow my saving.
My conclusion, it seem is that if I want to invest on let say ETF fund, i will have to find a broker that i can trust and comfortable to work with, or go to online site that i can do my transaction on my own. or i can go through a bank but i think that will cost me more management fee.
necause i don't have a broker that i can trust on my mind, and i don't think i can do my own transaction online, what do you think if i invest through a bank with the management fee of 2% per annual?; May 09, 2010 11:23 AM
Anonymous said...: Mister, it serves you well to avoid those product pushing agents from ntuc. I know what they will recommending you. Either one of these products, vivolife or revosave. Neither meets your children's needs. Either product will leave you poorer in term of protection and saving. They are rotten , in short.
The best insurance , other than the H&S medical, is keep your money and buy your own. If you are not insured enough , your children's insurance will be useless and will be canceled. Listen to Mr. Tan. Don't listen to the salesmen from ntuc. They only want your commission.; May 09, 2010 12:13 PM
Wayne said...: 1) To Author of "Saturday, May 08, 2010- Save for children (2)",

Do not bother with endowment policies, they offer very little protection and their returns is just the same as your own savings with no inflation adjustment, worse than savings, I would say.
Nonetheless, you can still take a look, but take very careful look and consider thrice.

First of all, insure yourself first- the "money maker" of the family.

2) To Anon May 09, 2010 11:23 AM

If I were you, I would give myself an investment horizon of at least 10 years, and invest into a "drip in money" (aka dollar cost averaging) method. I think POEMS (still) offer a min $100 per month to subscribe to a RSP plan and STI ETF is one of the allowable securities. With $10,000, you can invest over 100 months (8.3 years) and have lesser worries about market ups and downs. Based on STI's track records of 6%-8% p.a returns, you would see an IRR of 2.8%-3.8% p.a on "drip in money" (aka dollar cost averaging) method.

And on the bank's annual management fee of 2%, try to negotiate to 0.5%, or else no point; you are giving the right to the banker to make money for the bank with your own money.; May 10, 2010 6:36 PM
Anonymous said...: Hi Wayne,
thanks, i agree with the dollar cost averaging, this is good advice for me as i do not want to bear the risk of market fluctuation.
i seriously consider on POEMS too, but before i open an account, i will had to sign a legal agreement. and i am the type that won't go into something i don't understand. so i am still looking at the legal agreement and also trying to understand more on investing in STI ETF. but i am also not sure if it is good to be so careful like me. because sometime you tend to miss out on good opportunities when you are like me. but it is after all my hard earned money.
regarding the bank management fee, you mean i can negotiate on that?
finally, thanks for the advice again!; May 11, 2010 10:05 AM
Wayne said...: You are welcome.
Honestly, I feel that if you are going to do dollar cost averaging eventually, then you can jolly well D.I.Y with POEMS (or similar broker firm) and do without the banker.
The banker does not value-add to the plan at all. Which is why I thought 0.5% is fair enough instead of 2%. Unless the banker can guarantee some form of minimum performance high-watermark-based fee to charge you, then it would be ok (if acceptable to you). But bear in mind that would not be dollar cost averaging already, but rather portfolio management. From what I can recall (correctly), even POEMS offer only 1.5% or 1.2% for portfolio management fee. You probably have not shopped around enough to compare.
With S$10,000, the banker will probably not negotiate, but you can give POEMS (or fee-based F.I.s) a call to find out and compare. Or just D.I.Y (like myself - I have my own methodology that I use to manage my portfolio); May 11, 2010 3:07 PM