Being a young adult and managing financial responsibilities can be overwhelming, especially when there are so many adult duties to consider. From student loan repayments to saving for major life milestones such as preparing for marriage and owning your first house, the struggle is real. Let’s face it, most Singaporeans are not just bound to occasionally overspending, but also to a high cost of living.
As you go up the corporate ladder, your spending habits might also shift significantly from the days of being a somewhat broke first jobber to when you have a little more purchasing power.
Here’s some piece of advice: saving for the future is more essential than you can imagine, even if you don’t know what to do with those savings.
This article explores how an Investment-linked Plan (ILP) can be the key to turning your financial dreams into reality.
Saving Options for Young Adults
Now, let’s go over your options for saving your money and preferably, increasing your wealth too . While it may be simple to absorb investing theories from YouTubers and TikTokers, putting those concepts or investment recommendations into practice to create an investment portfolio may not yield the best results.
The traditional Milo tin savings account is an obvious place to start. It is very accessible and allows you to conveniently move your money, but like other low-risk choices like term deposits and Singapore Savings Bonds, it may not earn enough interest to meet inflation.
If you want to see your money grow a little faster, mutual funds, exchange-traded funds (ETFs), real estate investment trusts (REITs), and stocks may offer larger returns at a higher risk. However, all of this may appear to be overly confusing, especially if you are new to investing.
If you want to invest in a wide choice of funds that are constantly reviewed by competent investment specialists while also receiving additional insurance protection, investment-linked plans (ILPs) are something to think about.
Let’s take a closer look at how ILPs can help you achieve your financial goals.
ILPs for New Investors
For those new to investing, ILPs serve as an excellent starting point. With an ILP, you gain exposure to diverse funds managed by experienced professionals, reducing the stress associated with market uncertainties. Besides wealth accumulation, ILPs offer insurance coverage, providing peace of mind as you embark on your investment journey.
Let’s start with a basic definition of an ILP: it’s a financial tool that combines protection with investing. With an ILP, you can benefit from insurance coverage while also having the prospect to build money. Premiums paid will be invested in a variety of funds, with a wide range of options to suit your risk appetite and investment needs.
An ILP is one alternative you might consider to jumpstart your investment journey, especially if you don’t have much time or money to spare.
If you want to avoid the headache of making frequent payments, you might choose a single premium plan that only requires a one-time lump sum payment.
Accumulating Wealth for Life's Milestones
ILPs provide a disciplined approach to saving for necessary life events, like buying a home, education, weddings, and retirement. Additionally, ILPs offer the flexibility to adapt to your evolving financial situation. Whether through a lump sum or regular contributions, ILPs empower you to accumulate wealth over time, providing funds for your significant life goals.
Furthermore, some ILPs may allow you to withdraw your funds, depending on the policy restrictions. Some allow you to withdraw some of your assets during the minimum investment period for free if you meet specified life events, such as getting married or putting down a deposit on your first house.
Starting early, as with most financial accumulation strategies, is usually advantageous due to the power of compounding interest. This is particularly useful for young adults in their twenties. Consider your investment growth to be similar to rolling a snowball down a mountain: a longer runway allows your snowball to grow exponentially larger.
The Power of Starting Early
ILPs can adapt and grow alongside you and your specific financial priorities.
As a young adult, you may encounter a number of new financial situations that require prioritization. These key milestones, such as obtaining a mortgage, receiving a raise, or even experiencing the dreaded retrenchment, can all have an impact on your financial priorities.
ILPs’ flexibility can be extremely useful in this situation.
If you have a lower risk tolerance or are less financially secure, a little investment will be just fine initially.
ILPs leverage the power of compounding interest, making them particularly advantageous for young adults in their 20s. Starting early allows your investments to grow exponentially, similar to rolling a snowball down a mountain. The article compares the impact of investing today versus waiting five years, emphasizing the importance of early planning for long-term financial success.
Adaptability of ILPs
As a young adult, financial priorities change with new commitments, pay increases, or setbacks like retrenchment. ILPs offer flexibility, allowing you to tailor your investment strategy to match your risk tolerance, financial goals, and circumstances at different life stages. This adaptability ensures that your ILP grows with you, maximizing returns and providing financial security.
Conclusion:
Consider an ILP to kickstart your journey toward financial prosperity. With ILPs offering a unique blend of insurance coverage and professional fund management, young adults can secure a disciplined and flexible approach to achieving their financial dreams. Start early, stay adaptable, and watch your wealth grow over time.