Understanding Savings Plans and How to Grow Your Wealth
Malaysians have been known to not be very financially prepared when it comes to savings. According to a survey by Bank Negara Malaysia, 75% of Malaysians struggle to even come up with RM1000 in cash for an emergency.
There are many benefits to having a savings plan, and you should ideally start one as soon as possible, if you haven’t already.
One of the options you have of saving your money for the future is through savings plans offered by insurance providers.
In the following sections, we’ll look at how these savings plans work and what it means for you in the long term.
Why do I need a Savings plan?
Having savings isn’t just about having enough money to cover an emergency. It is also about planning for the future and unexpected circumstances that may affect your life. Also, a savings plan will be able to help grow your savings, whereby you can enjoy its interests upon maturity.
Apart from that, here are the benefits of investing in a savings plan:
1. Providing for Your Children’s Education
A wise decision for any parent is to start planning on how you can finance your children’s education from the time they start schooling. Putting aside a tertiary education fund will help your children stand a better chance at studying in a college or university of their choice.
An education fund will mean that your children’s burdens will be lightened too, as they won’t have to be bonded to a scholarship provider or take an education loan.
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2. Funds for Medical Treatment
Savings and investment plans mature in about 20-30 years, which means that if you buy them as a young person or a middle aged person, you’ll enjoy better financial protection when you’re a senior citizen.
Even if you have medical coverage already, it helps to have additional funds set aside for health related expenses in your old age. This is especially useful as aging tends to bring about a higher chance of medical issues developing.
3. Additions to Your Retirement Fund
When you’ve spent your whole life working, there comes a point when you’ll want to slow down. At this point of time, you may or may not have a pension plan supporting you.
Whether you have an income or not when you retire, investing in a savings plan will ultimately mean more resources will be available to you. You’ll be able to retire more peacefully and enjoy the things you’ve always wanted.
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4. Achieve your Lifelong Goals
Whatever age you’re at, you can always dream big and having a large sum of savings will help you achieve them. Whether it's traveling the world, owning your dream car, or buying your ideal home, having a large payout from a maturing savings plan is one way to help your goals financially.
Savings Plans Compared to Other Investments
There are definitely many other investment opportunities out there, such as Forex and unit trusts. These investments can possibly have high returns, especially when the market is performing well.
However, they’re also highly volatile and can have value’s that plunge at any time depending on current issues. Savings plans from insurance providers are much more stable and have guaranteed maturity benefits at the end of the policy’s term.
How Does a Savings Plan Work?
A savings plan offered by an insurance provider usually involves you having to pay a set premium annually (known as the savings component), and then enjoying a lump sum benefit payout upon the plan’s maturity (known as the maturity benefits).
After a set period of paying the premiums, which can vary from 5-30 years, the savings plan matures and a large lump sum is paid out to the savings policy holder consisting of whatever he or she has paid, as well as added maturity benefits.
The maturity benefits differ for each savings plan. However, the longer you invest and the longer the maturity period, the higher the benefits usually are.
Each insurance provider offers savings plans with differing details, which can often be customized to fit your needs.
However, savings plans in general can be classified into two major types, Endowment Plans and Investment Linked Plans.
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The main difference is that Investment Linked Plans have a percentage of your savings component going to investments in the capital market, including bonds, mutual funds and stocks. Therefore, Investment Linked Plans usually give higher returns as compared to regular Endowment Plans.
Apart from paying out a lump sum at maturity, savings plans also offer coverage for various situations, including accidental death coverage, coverage for unexpected events, and many more.
What are Some Great Savings Plans to Consider?
Great Eastern Life offers several savings plans, all of which have their own unique features that make them suitable for different needs.
Great Eastern’s Great Treasure Wealth
Investment linked savings fund
Short premium payment period of 6 years to enjoy 20 years of coverage
High allocation rates and investment booster feature
No medical underwriting needed
Guaranteed death benefits up to 80% of premium and additional sums assured
Enjoy accidental death coverage
Choose your own unit funds to invest in
Benefits paid upon fund maturity
Great Eastern’s Great Flexi Wealth
Flexible premium payment period of 5 or 10 years with coverage of 20 years
Enjoy annual guaranteed cash payments (GCP)
No medical underwriting needed to take up the savings plan
Coverage for death and total or permanent disability
Double or triple protection for accidental death
Maturity benefits at the end of policy term
Uninterrupted protection of no-lapse guarantee
Great Eastern’s Great Flexi Plus
Enjoy annual guaranteed cash payment (GCP)
Maturity benefits at the end of policy term
Coverage for death and total or permanent disability
Additional coverage for death
Uninterrupted protection of no-lapse guarantee
Limited premium payment period of 20 years for policy coverage of 30 years.
Summing Up Savings Plans for the Future
Savings plans from insurance providers are yet another way for you to grow your wealth in a passive manner. Instead of just leaving your hard-earned money in a bank account, it would be wiser to put it in a place where you can allow it to accumulate interests and then collect it upon maturity.
Savings plans allow you to have control over how much interest you can earn, as there are often fixed benefits offered by the insurance providers upon the policy’s maturity. In short, savings plans are somewhat more safe and secure, with lesser risks compared to investing on your own in the capital market.
