Today while I was walking around in my neighborhood, I realised my bank was having some sort of event going on and I decided to find out a little about what’s going on. Apparently they were having some CNY event and offering some savings plan (as usual). But this time, I decided that I would keep an open mind about what he is offering and listened intently. Also, I thought it would be a good opportunity to learn more about the industry and what the career prospects are for his line of job. I think I managed to get quite a lot of insight, and as usual, I haven’t gotten myself the savings plan.
Should I save:
I understand the purpose of the savings plan and I agree that it’s important to have a savings plan. 3.05% is a decent rate for savings plan but not in the market for me. I can’t get over the idea that for 25 years I’ll have to keep contributing and locking in my capital for 3% interest rate. In terms of flexibility and opportunity that may come my way where I need the cash, I wouldn’t be able to use the cash, much like CPF isn’t it? To a non-saver, it is a good and disciplined approach towards a financially sound future. But to an investor like myself, I often get stuck at thinking about how I would have my capital locked up drawing a meager 3% with no potential capital appreciation.
But if I choose to invest:
I agree that a sum of money that should be set aside, ‘risk-free’, for other events such as retirement planning or family planning. However at my age and the kind of capital I have, is it worth to keep injecting money into risk-free asset? Assuming I put $200 each month into this savings plan, it’s $2400 a year and in 25 years it’s $60,000. My total interest would be $23,400 at the end of the tenure. A good sum indeed! But I go back and ask myself, should I take on the risk of being in the market and drawing dividend income as well as enjoy potential capital appreciation? 25 years is a long time and it could make or break or stock. 25 years ago, Coca Cola was worth $4. Today it’s worth $40. Of course not every stock turns out to be a winner but would I take the chance? Yes. Between choosing to live reasonably comfortable, and having a chance to live luxuriously, which would you choose? I’m guessing Singapore Pools would have closed down if everyone were happy with living just reasonably comfortably.
Readers, what are your thoughts on saving plans? Leave a comment! Would love to see what investors think about savings plans.
Feel free to read 17 Investment Options by my friend, Giraffe Value.