Why Savings Plan Is Bad

In this video, I’ll explain what’s a savings plan, what are the pros and cons of it. Then if you have savings plan, I’ll tell you whether you should keep holding it or just cut it?
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0:00 - Intro
1:01 - What is savings plan?
A savings plan lets you save money over a few years. Typically it will have a guaranteed and non guaranteed return.
2:28 - Why do people hate savings plan?
Savings plan gives really low returns. Even though the example shows 3.25% return, the XIRR is just 1.4%, which is really low.
www.straitstimes.com/business...
www.lendingmemo.com/xirr-calc...
Investment Moats had compiled some data from his viewers, and I that the XIRR doesn’t correlate with the duration. The average return is around 2-4%. The return is low because a huge part of the investment goes into bonds, and the investment has a high expense ratio.
investmentmoats.com/budgeting...
The 10 year average return for all of the companies is around 5%, and different companies charge different expense ratios.
blog.moneysmart.sg/life-insur...
Another reason savings plan is bad is because it’s illiquid. If you choose to terminate the plan early, there’s a very high penalty.
6:31 - Is there any reason to sign up at all?
There’s a difference between saving and investing. Saving is for the short term, eg buying house 5 years later while investing is for long term, eg retirement 40 years later.
It’s not efficient to save for retirement because of inflation, and the money does not grow as fast. So it depends on what are your goals. If you want to save for something in the short term, then a savings plan would make sense.
8:50 - Alternatives to savings plan
10:32 - Should you cut it?
None of this is meant to be construed as investment advice, it's for entertainment purposes only. Some of the links and other products that appear on this video are from companies which Kelvin Learns Investing will earn an affiliate commission or referral bonus.

[@raygacy]

Love this! Thank you for this! How about doing a video on ILP? 😊

[@comic098]

Thank you for sharing this with us❤️❤️❤️

[@singaporewatchcollector6262]

Bought some for my kids and what you said has valid points. I own stocks , etf, crypto , commodities but you’re missing out the most important point. Even those other asset classes give me higher returns but will it give me a guarantee when my kids turn 21 and I need $500 k for their university fees, allowance, tuition fees , expenses and flight tickets etc ? If the market dips then would I want to sell my stocks to use the cash for these? Of course not. But there is a guarantee with a Low yield savings plan at least and I get my capital back with some interest. Also not many people are as disciplined as you. Most who buy stocks will paper hand and do stupid stuff losing them money overall hence the term dumb money. And the smart money wins

[@wayneng8684]

Kelvin gave the alternative for savings plan in the video - Bond ETFs and you can receive the money quickly by selling them with no penalty.

[@_LYH_]

Those insurance agents and financial CON-sultant will hate you to the core 😅

[@shan2lu]

Thanks for providing alternatives to savings plan! 👍

[@amyku8454]

super agree. My saving plan going to mature this year (10 years plan) return is really low. Projected interest rate proposed by the insurance company just a trick to hook u, actual pay out interest rate far below their "idea rate" . Think 3 times before u act.

[@cedrust4111]

Does your insurance agent generate returns (i.e. Alpha.. excess returns above benchmark like MSCI Index or SPX Index)? If not how much are u paying them on the expense ratio? And lastly do you think you should lower that on the insurance agent side if they can't deliver alpha

[@ysw6166]

Hi Kelvin, can you share a video on how margin works when you use that to trade Options on IBKR?

[@shawnthedonk2572]

Thanks Kelvin!

[@valuabletips560]

To be honest, by buying ETFs and stocks you can also sell them and get back the cash almost immediately in about a day or 2. I almost bought a saving plan when my friend introduced it to me.

[@zanang194]

I agree with u. A savings plan requires commitment in terms of paying premiums and will lapse after the grace period if premiums are not paid. Investment-linked policies on the other hand have a premium holiday feature but the cost is covered by the company selling the units accumulated in your cash-value.

[@popocucu4829]

Saving plan is to provide more liquidity support for bank to roll for higher profits but you won't get a portion for full profits :) No longer park any new funds on saving plan. Waste of time. Choose something that can liquidate fast, no lock in period.

[@dnesh1996]

Hi Kelvin, what are your thoughts on the short term endowment plan of Great SP Series 9?

[@randytong1999]

i brought like this whole life insurance plan. is it the same as saving plan? is whole life insurance plan worth it?

[@shudupass]

what about investments offered by insurance company, ae they classified as savings plan also?

[@TheHumbleChartist]

Nice video as always :)

[@plastic040z]

Hi Kelvin, Could you also do a video about ILPs/ investment policies ? To expose the amount of hidden fees

[@Zen-ki3eq]

Out of the topic. Is VPN ok to use in binance singapore?

[@chensymatt]

Love this content bro! As a financial consultant myself, I totally agree with you!

[@JCzzzzz]

3.25 and 4.75%. Has insurance companies ever not pay the higher projections? Do you have that researched?

[@zanang194]

To add...In most of these traditional participating plans where risk pooling is involved and death benefit is available, there is considerable front loading where premiums paid are used to pay for costs 1st and the balance then invested into the participating fund. Also, there is no returns for the 1st 2 years. So there is opportunity cost lost. Imagine u bought the savings plan during the covid19 rally; u will be sad to know that in the bull run that came after that, u earned $0 as it's still within the 1st 2 yrs.

[@ing1147]

retirement plan is thr same as savings plan?

[@justinng2523]

could you do one for investment plan?

[@esteo89]

Usually single premium will give higher XIRR compared to regular premium

[@fenblaze]

Instead of getting a Prudential savings plan, getting Prudential stock would be the better option 😁 I cancelled my entire family's saving plan premium and threw all of it into stocks and made back my capital and projected 10 year earnings within a year

[@thomasgoh6176]

Is there a prudential stock?

[@Lucas-wn5wm]

@@thomasgoh6176 yeah its in NYSE if im not wrong

[@chearminhan5145]

Halo. Can talk about Hugo Save?

[@dmba2582]

At current rate hike cycle environment, Singapore saving bond (SSB) is better than bond ETF because SSB can be redeemed at par value with no market value loss, whereas bond ETF prices will continue to drop as Fed rise interest rate in next 12-18month time. Happy and safe investing!

[@Ghostly-Bear]

Is Pruflexicash worth it?

[@kahhengtee5746]

Saving plan with coupons payout what's your view ?

[@DerLostPotato]

the thing i dont like about insurance saving plan is, what if by the time my policy mature, market is down because of war/fud/fed raise rates ...i cannot choose to hold because "time is up". if i hold crypto/stock/etfs, market down i stlil can wait. insurance companu will just pui your money back regardless at time of maturity market is good/bad.

[@zanang194]

On the flip side, most of the funds that the insurance companies invest into are actively managed in which information about the fees are not readily available or made away to the consumer who might not be financially savvy to do due diligence.

[@DerLostPotato]

@@zanang194 and also, part of your premium goes to the insurance portion instead of the saving/investing component. My take, just buy a cheap term insurance and invest in other more profit generating platforms.

[@martinweng87]

if the insurance company also don’t do well when market is bad, but takes a cut from u when it’s doing well… then why don’t just DIY invest urself?

[@limzhanxuan5677]

Hi Kelvin, do you invest in gold or any precious metals?

[@KelvinLearnsInvesting]

No i dont leh

[@kaliyaperumaldeepan85]

i cut my loss for the savings plan. The biggest scam in my life lol. All insurance savings plans are approved scammers. I wish the government can look into this to prevent this legal scammers haha.

[@zanang194]

I cancelled my ILP early on coz the mortality charges past 65yrs oid is crazy and will eat into the cash value.

[@chuckyinges]

Wow Kelvin, that turtle is really chao ji bai!

[@MrSiljackwong]

I had a 20 years savings plan, cut it during year-8. Loss about 21% on the premium paid.

[@TheBaobeii]

Better to cut losses early and source alternative to recover back

[@MrSiljackwong]

@@TheBaobeii yes agree.

[@Aivern]

No. Endowment plans are the absolute worst. Even for the examples you highlighted, there are so many alternatives that dont keep your money away from you. One cpf component in our lives is enough!

[@elynno9911]

Oops I have few saving plans that will mature in every 5 yrs fr age 45 till 70.. some just break even n some still in loss.. anyone can advise：1） Shd I cut ？2）shd I stop those maturing soon or those still got yrs to go？Tks

[@CalvinK300]

I have such plans bought when I was just starting out. Nothing wrong because at a young age, I got not much savings, no financial knowledge and many other priorities. As I got older with more savings, then I look at other investments. It’s like spreading the basket and learn more about various investment options. Now, being financially independent and retired, my saving plans have all matured and unsurprisingly, these monies are peanuts to me. However decades ago, I was super impressed with the ‘projections’.

[@wolfbeastdevil]

It's so true.

[@SlashOMine]

thumbs up for the vid and channel

[@Leanna007]

I bought a 30 years saving plan, didn't even undertsand my policy, feel regret because everyone says its bad but haven't have the heart to cut it 😢 Thanks for this video, it's very informative Can anyone answer me, is it possible to get negative return at maturity?

[@zanang194]

Rarely negative since u can check the surrender value on the benefit illustration how much is guaranteed and add the estimate a conservative non-guaranteed return. But this assumes that u out-live the breakeven year lah (touch wood). If u breakeven already, means numerically u didn't lose $. But the future value of $ would be eroded by inflation which u will then need to factor in. (Opinion): But after so many decades of savings, the true internal rate of return is low. Then u factor in inflation 2-4%, best guess is perhaps you have hedge against inflation but i won't consider savings plan a good way to earn a profit.

[@octovanfoo968]

I think the best case would be selling to third party companies instead of surrendering

[@sleepandrelaxation3395]

Love that white turtle !

[@00Ace00]

Of course. No to savings plan. Cut my losses many years ago and never regret 💪🏻

[@gyutaro88]

Timely video, time for me to take the loss like a man!

[@jklinsmann85]

Savings plan to pay for the conti cars of insurance agents

[@MrBorsh85]

If you buy from insurance agents.. your first 2 years earning would have gone into the agent's pocket as commission. Rather buy a cheap term plan and then invest

[@watchguy4863]

Lol you must be one of those who thinks they can invest and make consistent returns. What’s your ROI like ? Most people lose money investing in the stock market that’s why hedge funds make money.

[@TheBaobeii]

Not 1st 2yr earning.. more like 1st 2yr contribution towards the plan goes into their pockets..

[@bryanchee6279]

Does bonds create inflation?

[@KelvinLearnsInvesting]

Inflation is when sellers raise prices, and people are willing to buy it. So bonds dont create inflation

[@HypertronicTeddy]

TSLA is my savings plan

[@Sethisfy]

You're looking at the death benefit chart when you should be looking at surrender value. Surrender value is even worse than death benefit! 🙃

[@jjhereonfunisland]

I personally regretted having signed up for savings plan. The overall return is quite low.

[@elep8906]

What do you think of the USD direction in today’s market? If USD devalue, it would be a risk to hold USD stocks in place of savings plan. What’s your view?

[@karensun6741]

Super noob qn: is savings plan ILP or endowment or something else?

[@squalolo]

endowment. ILP has a higher risk and slightly higher returns compared to endowment

[@Salty_Biscuitz88]

It’s a good plan for the insurance agent himself/herself haha

[@popocucu4829]

Because more commission :)

[@leowalan5463]

Thanks.. you really teach me allot.. so forced saving plan don't really help ley

[@dysfunctionalisme]

😭😭 I'm into my 6th year of my endowment plan of 25 years 😭😭 very heart pain if I cut it but I'm also really regretting it right now 😭😭 what should I do??

[@octovanfoo968]

In my opinion I think best is to carry on if you have nothing on. if you need cash urgently maybe try selling to third party companies instead of surrendering. See the table for the breakeven year

[@ployny]

If you cut, what are you going to with the money? How confident are you in beating the market? Or are you just going to treat yourself or let inflation eat it away?

[@brandon-tong]

These kind of savings plans almost seems like they want to bait you to surrender your policy earlier so they can penalty you heavily Even if you do not bite the bait, you get minimal returns at the maturity date which is donkey years later Yeah savings plans sucks

[@zanang194]

I personally believe that for the insurance companies, it's all about cashflows. Put hefty penalties on policies if premiums are not paid up so that u get steady cashflow. Use that cash to invest. If they make profit, they keep a significant portion of it, and give back some to consumer. But if their investment goes bad, they still make $ due to fees but consumer's capital is affected .

[@seandaniel3994]

I rather buy s&p 500 dca monthly!

[@watchguy4863]

For people retiring it’s good to put all the money in the stock market ? Wait till the market tanks huh

[@rachh751]

I have a friend who lost everything in the stock market. Low risk plan is diversification

[@KelvinLearnsInvesting]

What stock did he buy? Its not possible to lose everything unless he is buying bad stocks

[@NinJa-qr1sp]

I hated savings plan in my younger days. But I think you're not painting the full picture here for retirement planning. The whole idea of retirement planning is to save up now for long term future when u stop working. When you're closer to 40 or so, your risk appetite is lower and you will need to trade yield for security. If a savings plan can give you a 3% return or so, it would have beaten inflation and secured your nest egg. I'm afraid your advice is geared towards individuals with high risk appetite and dreaming about high double digit returns without first securing a base layer of security.

[@Cedricchoy]

I think the objectives of the saving plan differs from investment on equities/bonds/commodities. The saving plans though have lower ROI, some of them does have insurance coverage over the period of time. It is typically more appealing when you are younger when your income is lower and they offer additional death benefit like 50,000 or 100,000 which could easily cover few years of your yearly income back then. It becomes less attractive when you are earning more and would most probably have more coverage using term insurance than what they offered.

[@keijiazum9282]

so many scammers leaving comments in yr channel

[@thomasgoh6176]

Said is easy but if you bought into the wrong stock you may loss until pant drop. Saving plan at lease for those who are not good at buying or spotting a good stock. Not many people are lucky to buy Tesla like you did.

[@KelvinLearnsInvesting]

I feel that savings plan is not a good excuse for unable to invest well. Good stock is easy to spot, don’t have to rely on luck. Eg google, apple, amazon are good stocks. Luck is only required if i want a multi bagger

[@novoselova82]

Yes! regret it now. but some time ago with zero knowledge about investment seemed like a good idea to put aside small money for guaranteed small return.

[@stickymoney]

Oof, it's a very very dangerous video to be posting esp the last part on getting ppl to cut their plans. Hope viewers don't take it wholesale but with a pinch of salt according to their life circumstance. 🙏

[@elynno9911]

I think he just 🤔 referring saving plan can cut and not other insurance products

[@d3athsharker]

i fked up

[@kaidollarsense]

FA be disliking this video.

[@ongtw89]

This is death benefit not surrender value right? Surrender value worse. Think u use the wrong table. But conclusion still same. Saving plans is bs

[@rachh751]

I disagree. My saving plans under Hong Leong is giving me 8-10% return a year which is much better than other companies. And you need to buy it during market downturn hence you get more units at cheaper price. If you do this, over 10 yrs it will be more than 8-10% p.a. And i can choose to reinvest my guaranteed 20% interest every yr and withdraw it on the year i need it the most. Saving plan is a good diversification of your income. You shouldn't put everything in stocks and crypto. Just my opinion (:

[@mpgleisten3]

Source??

[@KelvinLearnsInvesting]

Can share what’s the savings plan name?

[@TheBaobeii]

What talking you.. at 1st you said 8-10% p.a. then suddenly mention guaranteed 20%.. additional 10% drop from the sky or your imagination?

[@mpgleisten3]

@@TheBaobeii yeah, felt like an ad plug but the actual product isn't mentioned. Couldn't find anything remotely similar searching online.

[@rachh751]

@@TheBaobeii 8-10% is the non-guaranteed portion

[@muffemod]

Plan Bad-Bad

[@ployny]

I appreciate the work you do here in this space but sometimes, it's cute how you cherry pick your figures from the product summary to suit your narrative. I agree saving plans are not the best investment vehicle out there but the purpose is to help you accumulate wealth over the long term. And what is the best investment anyway? I personally purchased a saving plan that allows me to choose the fund that my money invest in and it has given me an average 6-8% p.a for the last 5 years. It also acts as a diversification tool as well since I have money in stocks and crypto. While there are a lot of agents out there trying to make quick commission, if you know your stuff, just ask if you can choose the type of funds that your plan invests in and study that fund. Ask who is the fund manager and all the fees involve. Sure the fee is high and that's because the fund is actively and professionally managed. Basically you invest your money and go to sleep. No need to get headache over managing and picking your own investment. Easy for everyone to say "buy term, invest the rest" or "I can earn better rate investing on my own" but how many actually make money investing? How many actually invest? For example, if you started investing in the S&P 500 in late 2019, when the market freefall during the pandemic in Mar 2020, either you cut your losses early, double or triple down IF you have spare cash or you can kiss your entire portfolio goodbye. It's good that the community is trying to learn about money but take everything with a grain of salt because internet gurus are not held liable since they are not regulated by the government. I speak to my trusted advisor and we learn from each other from time to time. If you ask the agent about the different funds and fees structure and the agent beats around the bush, just say thanks for the drink and leave. Normally, I will ask them to send the fund factsheets and product summary so I can analyze them. Don't let them close the deal in 1 meeting no matter how persuasive they are. Or if your agent is an excellent one, he/she will compile and send it to you to make your life easier. I rather do my own due diligence and listen to people who are regulated because they can be held accountable by the government.

[@DenHeart]

Saving plan suck. I hate financial consultant. was with Aviva last time, their service was horrible. Met 2, both are super noobie. since then I blacklisted Aviva. when ppl talk about Aviva, I advice them to stay away from Aviva with my experience.

[@pth8888]

Those 2 u met r young & chio is it? Look for matured n experience ones lah 🤣

[@DenHeart]

@@pth8888 sadly no... 1 guy 1 aunty

[@pth8888]

@@DenHeart 🤣🤣🤣

[@weijieliao4890]

Meaning retirement savings plans are bad too.

[@popocucu4829]

Retirement plan is just another product name.....Retirement plan consists on your own active investment and passive investment. Can't depend on one asset class.