27 Jun Best Savings Habits to Pass On to Your Child
Parents worry for their children, even when they are well into adulthood. Indeed, one of the greatest worries as a parent is that our children grow up without achieving financial security. We can provide for them as much as possible, but ultimately, they will need to learn to manage their own finances wisely. We can lead by example by saving wisely and inculcating good savings habits in our children from an early age. This will influence their financial behaviours and encourage them to be mindful savers for a brighter financial future as they move forward with their lives. As the saying goes – give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime. Read on to learn about three tips to help you optimise your own savings habits.
#1: Create A Portfolio of Savings Instruments That Suits Your Individual Needs and Risk Appetite
There are numerous types of savings instruments available out there. Your ideal portfolio choice will depend on your flexibility for current spending and your desire to amplify your future wealth. If you have a lower risk appetite but desire greater flexibility, you might be thinking of putting your monies into bank savings accounts. These are largely risk-free and allow for withdrawals at any time. However, even the best savings account does not offer interest rates that allow for significant accumulation of wealth for the future. If we wish to lead a comfortable retirement lifestyle in Singapore, it is necessary to have sufficient savings in our egg nests for both routine and contingency spending. For the most part, relying solely on bank savings returns may not be enough.
On the other end of the spectrum, investing in stocks and shares is another alternative to maximising your future wealth. This is a risky option which is not suitable for everyone as losses could easily wipe out lifelong savings. It can be part of your portfolio of instruments for retirement planning, but should be supplemented by other instruments to mitigate the risks.
A happy middle ground between these two options is to save through insurance endowment plans. Endowment plans are long term savings plans that also offer life insurance protection. Although they require longer term commitment (typically 10 to 20 years) in terms of premium payment, they offer better returns than bank savings accounts without the higher risks associated with stocks and shares. The higher returns and lower risk nature of such instruments, coupled with life protection benefits, make them an ideal component of retirement planning.
Wouldn’t it be great if there was an insurance endowment plan that grants you both the flexibility to cater to your more immediate spending needs and the ability to accumulate the wealth you need for a comfortable retirement? Better yet, what if this plan could also ensure continuity of benefits by allowing you to appoint your child as a secondary life insured, such that it protects your child against contingencies while allowing the value of the policy to continue growing during your child’s lifetime? Now, there is such an endowment plan! Etiqa, the leader in innovating insurance solutions for customers’ needs, is proud to introduce AmplifyFlex, a new whole-life endowment plan with all these benefits and more! With this as part of your savings portfolio, you will be ready to achieve financial security.
#2: Make A Commitment to Start Saving Early
Even with the best plans and portfolios, you will need to make a commitment to start saving a portion of your monthly income early, so that there is sufficient time for the savings to accumulate and grow. This requires discipline as such commitment may mean saying no to that luxury purchase or expensive annual vacation trips to exotic locations until you build up your wealth. Indeed, this commitment to start saving early is an essential habit that needs to be passed on to your children. If you have insurance endowment plans as part of your savings portfolio, impress upon your children the importance of this commitment by demonstrating how you consistently set aside a sum for the premium payments. To give your child a head-start in wealth accumulation, appoint him as the secondary life assured if you have an AmplifyFlex plan.
#3: Consider Opportunity Costs
Children who give in to instant gratification and frequently spend on small treats will find it difficult to save up for more worthy items. Adults can demonstrate to children about opportunity costs by prioritising where we put our monies. For instance, housing loans are big ticket debts for many Singaporeans. We may be tempted to pay off our housing loan (or any other big ticket debt) as soon as possible to reduce our interest payments, even at the expense of reduced savings. However, this may not always be optimal. You will actually be better off taking your time to pay off that big ticket item if the interest rate associated with the debt is lower than the returns from your savings. Thus, do seek options for savings (such as AmplifyFlex) that can offer returns higher than your cost of loans (housing loan rates in Singapore average at about 2%) while retaining the flexibility of withdrawals when you need the cash for key milestones in life.
Committed to placing people over policies, Etiqa is a Singapore insurance company owned by Maybank Ageas Holdings. Maybank Ageas is a joint venture between Maybank Group–the fourth largest Banking group in Southeast Asia with more than 22 million customers across 20 countries worldwide, and Ageas –one of Europe’s largest insurance companies with 33 million customers across 16 countries and a history of over 180 years.
Protecting more than 550,000 homes in Singapore since 1961, Etiqa is best known as the appointed insurer for the Singapore Housing Development Board (HDB) Fire Insurance Scheme. Etiqa also provides comprehensive life and general insurance solutions with affordable and transparent insurance premiums. These include motor insurance (including motorcycle insurance), travel insurance, home insurance, maid insurance, personal accident insurance, insurance savings plan, insurance endowment plan, retirement and legacy planning. Etiqa is one of the first insurance companies in Singapore to empower its customers with online insurance, offering innovative, customer-centric experience such as real-time travel delay insurance and usage-based car insurance.
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As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid.
This content is for reference only. You should seek advice from a financial adviser before deciding to purchase the policy. If you choose not to seek advice, you should consider if the policy is suitable for you. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Information is accurate as at 30 August 2019.