Adulting Financial Planning Investments

How an Investment-linked Plan Can Bring Your Financial Dreams to Life

byEwen Boey
  • Jan 19, 2024
  • 8 mins
woman looking far away

It’s not easy dealing with financial responsibilities as a young adult. Believe me, we’ve all been there.

Managing finances can be a daunting task, especially when there are so many adulting responsibilities – repaying student loans and saving for future milestones like getting married and owning your first home. Not only does Singapore have a high cost of living, but let’s face it – a fair number of us can be prone to spending a touch beyond our means at times.

Spending habits can also change a lot from the time of being a relatively broke first jobber to having a bit more spending power as you climb the corporate ladder.

Some words of advice: saving for the future is more important than you think, even if you don’t yet know what to do with those savings.

So let’s talk a little about your options to save some money, and ideally to grow your wealth too. While it might be easy to learn the theories of investing from the likes of YouTubers and TikTokers, actually applying those concepts or investment tips to craft an investment portfolio might not lead to the best expected outcomes.

An obvious place to start is the good ol’ Milo tin savings account. It is highly accessible and you’re able to move your money around easily, but similar to other low-risk options such as fixed deposits and Singapore Savings Bonds, it may not accumulate enough interest to cover inflation.

If you want to grow your money a little quicker, then mutual funds, exchange-traded funds (ETFs), real estate investment trusts (REITs) and stocks may provide higher returns at a higher risk. But all of that can sound a little too complicated, especially if you’re just starting out on your investment journey.

If you’re keen to invest in an extensive range of funds that are continuously monitored by experienced investment professionals while also getting additional insurance protection, then investment-linked plans (ILPs) like Income Insurance’s Invest Flex are something you can consider.

Let’s take a closer look at how ILPs can help you with your financial goals.

Let’s start with a brief understanding of what an ILP is: it’s a financial tool that offers the best of both worlds – protection and investment. With an ILP, you can enjoy the benefits of insurance coverage while having the opportunity to grow your wealth. Premiums paid will go towards investing in various funds, with a wide range to choose from according to your risk appetite and investment needs.

An ILP is one of the options you can explore to kickstart your investment journey — especially if you have little time or budget to spare.

If you prefer to avoid the hassle of making periodic payments, you could opt for a single premium plan that requires only a one-time lump sum payment when you purchase the plan.

Or, if you have little budget to set aside right now, you can go for a bite-sized regular premium plan. For Income Insurance’s AstraLink, premiums start from as little as $100 per month. Regular premium plans can be customised in both premium amount and frequency, with the typical options of monthly, 3-monthly, 6-monthly, or annually.  Some regular premium ILPs like AstraLink also give you the flexibility to adjust your protection coverage.

If you're new to investing and looking for a way to ease into the world of financial markets, an ILP can be one of your starting points.

By going for an ILP, you can gain exposure to a diversified portfolio of funds, carefully managed by experienced fund managers who possess the expertise to make informed investment decisions on your behalf.

This can minimise the stress and uncertainty associated with investing, while you begin building up your wealth for the future. It’s reassuring to know that by getting an ILP, you’re also getting insurance coverage for that extra peace of mind.

pointing at ipad

Rather than going the DIY way and diving into market research for your investments, ILPs free you from the hassle by serving up a suite of options that had been curated by experts. Depending on your investment goals, you can choose from a wide range of funds– including equities, bonds, and money market instruments.

Think of it like a set lunch menu. Each ILP fund has its own mix of handpicked underlying assets. You simply need to pick your order, and a team of financial professionals will handle the rest.

There are some things in life that are necessary to save up for — your first home, a wedding, further education, and retirement.

There are also the things in life that may not really be so necessary, but help to make your life more enriching and comfortable — purchasing a car, seeking out a life overseas, or welcoming a furry companion after moving into your future home.

While we know we need to save up towards all these important things in life, it could be hard at times to find the discipline to save or invest because there will always be indulgences that tempt us. It could be staying in a nicer hotel during the next vacay, getting the next generation phone or joining your friends on an impromptu trip. But with an ILP, it can offer you a disciplined approach to keep you on track for these long-term goals.

Whether you opt for a lump sum payment or commit to investing a small portion of your income regularly, you could accumulate your wealth over time. If planned early, your investment could snowball into usable funds for your wedding, renovation of your dream home or dream car.

Besides, some ILPs might allow you to withdraw your funds, depending on policy terms. Living up to its name of “Flex” (flexibility), Income Insurance’s Invest Flex lets you withdraw some of your investments during the minimum investment period, at no charge, when you hit certain life events, such as marriage or placing a deposit for your first home6.

As with most wealth accumulation plans, starting early is usually beneficial due to the power of compounding interest. This is especially advantageous for young adults in your 20s. Think of your investment growth like rolling a snowball down a mountain – with a longer runway, your snowball can grow exponentially larger. Let’s compare what happens if you invest today versus 5 years later.

Scenario 1: You invest today for 10 years

By investing $10,000 at an assumed growth of 4% per annum, you would end up with $14,802 at the end of the tenth year. That means you would have earned $4,802 with the effect of compounding interest, or 48% of your principal amount.

Scenario 2: You only start 5 years later

Now, let’s imagine that you only start investing 5 years later, with the same principal amount of $10,000 and an assumed growth of 4% per annum. After a 5-year investment period, your investment would be worth $12,167. That equates to an earning of $2,167, or 21.6% of your principal amount.

You might notice in this example, that by procrastinating and investing later, the earning is substantially lesser.

couple deciding on finances

As a young adult, you may find yourself facing a variety of new financial situations that demand prioritisation. From getting new financial commitments such as a mortgage, to getting a pay bump or even going through the dreaded retrenchment, these significant milestones can affect your financial priorities.

This is where the flexibility of ILPs can prove invaluable.

Let’s say you start out with a lower risk appetite or are a little less financially well-off, then a minimal investment sum will do at the beginning.

But what if, after a number of years in the workforce, you’re able to set aside a bit more? That’s not a problem for ILPs. You have the freedom to tailor your investment strategy to match your new risk tolerance, financial objectives, and circumstances at different milestones of your life. And by diversifying your investments across different types of assets, you can potentially maximise your returns.

Similarly, if you experience a temporary financial setback, such as losing your job, an ILP can be tailored to meet your financial situation.

Hot tip: look out for plans that offer a premium holiday, which is a benefit that allows you to stop paying premiums for a period of time without giving up the plan.

AstraLink^

  • Flexibility to customise plan to suit your needs from as low as $100 a month
  • Receive protection coverage based on the applicable sum assured multiple1 of your choice with a Minimum Protection Value (MPV) of 300% of the sum assured
  • Enjoy investment bonus of up to 67.0% of your regular premiums paid in the 1st policy year
  • Provide up to 1.0% annual loyalty bonus from the 10th policy anniversary
  • Maximise wealth accumulation with retirement option
  • Increase coverage at different life events2 with Guaranteed Insurability Option
  • Adapt to life’s uncertainties with premium holiday3

Invest Flex^

  • Flexibility to take a premium holiday4 at no charge for up to 120 months from the 5th policy anniversary
  • Enjoy an investment bonus of up to 60.0% of your regular premiums paid for the 1st policy year
  • Provide 0.5% annual loyalty bonus5 starting from the 10th policy anniversary or the end of the Minimum Investment Period (MIP), whichever is later
  • Maximise your investment with up to 105% of your regular premiums paid to purchase units
  • Adapt to life’s uncertainties with Life Event Withdrawal Benefit6
  • Continuity of wealth accumulation with a secondary insured7

If you’re keen on taking the first step into investing with an ILP, talk to us and we’ll be able to do a personalised needs analysis to help you figure out what is right for you.

Author(s):
Ewen is a seasoned content specialist with over a decade of rich experience in digital content. From weaving captivating narratives to devising impactful content strategies, his journey reflects a deep understanding of engaging readers at every level. 

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