This Week On Seedly: Relationship Problems, Insights on Endowment Plan, Ways To Save $100 Per Month

This week on Seedly, we have quite a number of pretty interesting topics going on.

Given that we are on a record-breaking week in terms of engagement on our Community, we have decided to do a quick summary of the top posts last week.

You are welcome!

What went down on Seedly’s Personal Finance Community (8th – 15th January 2018)

• Balancing religious donations with debts and savings
• Understanding you Endowment Plan
• What are some of the ways to save $100 per month?

Balancing religious donations with debts and savings

The context of the question:

#SeedlyQnA: “My GF and I have an argument on the amount of money that she donates to a religious council (sensitive) every month.

Despite having an overdue amount of study loan, she is still giving 10% of her pay every month to her religion. Although we are of the same religion, I didn’t bother to give that much of sum to them. She has little to none savings for a 25 years old but always look up to going for a short trip overseas, claiming it’s her hobby.

Can anyone give advice on how to educate this innocent little girl or is it my fault for not understanding? “

Seedly Community’s help on what can this member do

• Siti Putri
  Ask her if anything happen to her will that religious organization donate to her?
  Why is there a need to donate, can’t she just donate to real actual poor people in streets rather than such institution?
  Ask her for plans for future? Are u both serious about marriage, wedding, home, reno etc? If the relationship is at a really serious stage, I suggest taking financial calculations openly to set aside to save together with planning. If really cannot work or you do not like her answer, maybe it is time to say goodbye to the relationship? Sorry for being pragmatic but marriage is supposed to be a lifetime, if one marries someone who is not suitable, it might be really harmful to the couple’s finances. It will be a burden to both the psychological and relationship strain in long term. My hobby also travelling, but I personally saved to travel. Good luck.
• Carrie Sim-Goh
  It’s a case of priorities. I think there is no wrong or right when it comes to religious tithing. It’s a personal choice and priority. As for holidays, it is also a personal choice and priority above saving for now.

  The act of saving may not be a habit for her and I think a good way to approach it is to give her a reason to make it a priority. I’m guessing if you’re making an effort to get her to save it stems from a place where you view the relationship as an important priority for you and so her attitude towards saving is important for your future together. Perhaps, if this is the case, communication is important.
  

• Kenneth Lee 
  The act of tithing is deeply personal, but I’d suggest that since that portion is immovable, then something else has to go. So less expensive meals, adjusted lifestyles, eating at home more often, going for cheaper movie tickets or dropping 1 trip a year until she can afford it. This is all possible.
  But you must take the idea of her tithing as important to her, and make sure she knows that you understand that.
• Matthias Richter
  Sit down with her and write ALL your dreams (everything allowed) for her and your life on 3M post-its.
  Once done, place an A3 or larger paper on the wall (or use a whiteboard), draw a timeline, 2018, 2019, 2020, 2021, 2022 and so forth – it should reach at least 5 years into the future.
  Now, look through your dreams with a realistic eye together and decide the order you guys are going go to go after your goals together as a team! By doing this, you 1. team-up with her, 2. chase both of your dreams together and 3. will both be fine with being in for the long run. Going through your dream list together and agreeing on a game plan together will also empower you to see each others’ priorities better and eventually there might be certain parts of current life that got to give. If you want to have an extraordinary life, you got to get rid of an ordinary first. Inspire her to join you chasing your dreams together so that religion or anything else becomes secondary and negotiable. Wishing you lots of success and may your dreams come true! Cheers!
• Victoria Sek 
  Hey, my husband and I face a similar problem. The only difference is that we are not religious and we don’t donate any sum of money to any religious place of worship. I can relate to your girlfriend’s…lifestyle? Last year, I was 25. I had uni fees to pay, my phone bills were constantly overdue, I had two endowment plans, and the only time I would save is when I have made plans to travel with my friends. My husband knows that I have the habit to wipe out my savings everytime I travel, so he’d nag, and I’d get defensive about it. A couple of months after we got married, my husband sat me down and talked to me about the state of my finances. He laid out our future expenses i.e. our BTO, our renovations, our future children’s education fees, etc. and put it in perspective with a timeline. It made me realise that I cannot let him shoulder the burden of supporting our family. (I have a job, I just didn’t realise how important money was.) But I also wasn’t about to give up my travels, so we came up with a compromise: I take either one big trip to a far place, or I take two small trips to not-so-far places.

Read more about the discussion here. 

Understanding your Endowment Plan

source: Seedly.sg

This post provides a quick guide to help Singaporeans understand their Endowment Plan. While there are many variations of Endowment Plan out there it is always important to look understand the Benefits Illustration (BI) of the plan before getting your plan.

Seedly Community’s insight on Endowment Plan

• Johanes Pkmi 
  All Endowment Plans carry a very heavy penalty on early redemption. This should be taken into account before getting one.
• Alan Kor and Dinesh Dayani
  Both our community members, Alan and Dinesh believes that a relatively good product to consider on top of Endowment Plan will be Singapore Savings Bonds (SSB).
  
• While Fitri Khamis brought up a really good point on why some of the Endowment Plans have guaranteed amount lesser than initial capital, Xiaohui shared her insights.
  Xiaohui mentioned that it depends on what type of endowment plan one purchases – with cash redraw through the policy year or without cash redraw.
  First of all, the numbers are dependent on the Insurance companies and how they design their product.
  Hence, the purpose of the article is to educate people on the common endowment plans which you have seen regularly and may have a lesser guarantee of the capital amount.

  Secondly, many people pay endowment plan in monthly mode. The design of a plan is, however, based on Annual premium Mode, which also explains why most of the time, your capital is not guaranteed.

  There are plans which protect the capital, but there are a few criteria to look out for, and one needs to know on how to use it in order to protect your capital.

  Thirdly, the affordability factors. Some of the better Endowment Plans may have a higher premium than the common ones. The common problem is most people will say they want a plan allows them to save a little but have the flexibility to redraw. Such criteria will result in a recommended plan that has lower guaranteed on capital.

  Hence, the only thing we can do is control and educate our mindset that not all saving plans suit you. Also, one has to be wary of who is telling you the plan gives you max return.

Read more about the discussion here. 

Ways to save $100 per month

A quick context to the question raised on Seedly Personal Finance Community:

• The Seedly Community member wants to save for her daughter with $100 per month.
• She does not want to do a fixed income bond or equities with the money.
• What are some of the other instruments she should consider?
• An additional question will be that if she were to put this amount into the Singapore Savings Bond, how can she go about doing it?

Seedly Community’s help: How can one save up for her daughter?

• Hariz Arthur Maloy
  A few important factors:
  – The number of years one need to save before his daughter enters University.
  – Will it be a local or overseas University?
  Remember to consider using Central Provident Fund Ordinary Account (CPF OA) as part of the calculation.
  Next, consider your risk appetite. While some parents do like the idea that Endowment forces them to save for their children’s education, while it may not be suitable for others.
• Cathie Chew
  As a former insurance practitioner for 23 years 8 months, here are some of Cathie’s point of view.
  In the early years, projected gross returns were superb, at some 8% returns with a net return of some 6%. Back then, It made great sense to take up an Endowment Plan.
  What follows after, are then several crises from 1998, 2001, 2004, 2009 etc. The rate of returns came tumbling down and the 8% returns of yesteryears are now at some realistic returns of 5.25 %, 4.75% and 3.75% etc. rendering the endowment product almost totally unattractive, especially with the emergence of many other financial instruments these days.

  Using endowment to plan to fund education is no longer as attractive now, compared to the past.

• Hui Wei
  Form your own “Endowment Plan” instead:
  – Save $100 a month to CIMB FASTSAVER.
  – Pump Total savings with interest into buying Singapore savings bond every 6 months.
  – Rinse and repeat till daughter needs the money/studies/married etc.

  Guaranteed capital, Guaranteed flexibility, Guaranteed returns and Zero complications!
  

• Francis Mern Hau Tan 
  I do not think Endowment is bad. The correct word would be SPECIFIC.
  An Endowment had a very specific outcome and should only be proceeded if the consumer has a specific objective to be met. Allow me to narrate more:

  1) There was once a founder of established law firm planning for succession. He wished to sell his business off in about 15-20 years. His immedate 10+ lawyers are interested of buying over equal shares but lack the resources. An experience financial advisor suggested 10+ Endowment plan for all the lawyers with very good reasons. 1st, Endowment plan had similar Sum Assure as Maturity value, and if any specific lawyer dies before maturity, his/her plan would payout to his/her family and that would “buyout” the specific shareholding of that lawyer. 2nd, since the maturity is specific, over the years of “saving” into the Endowment plan, upon maturity, all the lawyers’ plans would paid out and “buyout” the founding lawyer or to the Estate. All parties happy, specifically!

  2) Endowment plan had specific payout period, just as my son and daughter had almost specific education timeline. More over, any financial instrument can promise better return ONLY IF there is a continuous input of money. However, only an Insurance company with the “INSURABLE INTEREST” law can guaranteed continous premium servicing upon payor’s demise with rider such as Payer premium eraser.
  That been said, if consumer are savvy with financial planning and had ADEQUATELY calculated Sum Assure risk planned for, then the above function would be served as bonus planning.

  My question would be. Which is more important? Returns or the realisation of the finanical objective for real person on real education.

  Adding to my comment after reading some of the above contributions. There are already Endowment plans that are offering above Capital Guaranteed returns plus standard bonuses regulated by MAS. Gone were the days, when guaranteed components are 80% of capital and bonuses are 30%-40% of capital.

• Lee Jiahui 
  Actually, at $100 per month, CPF contribution may be better. Contribute it to the kid’s CPF account and use it later for a tertiary loan should the education be done in Singapore.

Read more about the discussion here.