Best Savings Plan

How To Select The Right Savings Plan

More than 80-90% of the people I meet, have the need to save for some goal or the other (unless they have inherited a lot of wealth).

Savings plans have the following main features (which you can decide on):

  • Fixed Term vs No Term - Savings plans normally have a contractual savings term starting from 5 to 25 years, and anything in between. The latest savings plans in the market offer savings options with no fixed term.
  • Investment Vehicle - Typically regular savings plan will offer you a choice of ETFs (index funds) or mutual funds, or both.
  • Capital and/or Returns Guarantees - Some savings plans do not offer any capital guarantees. Some guarantee at least your capital. Others offer capital and  returns guarantees.
  • Currency options - Some savings plans offer local savings currencies, others offer international currencies only.

Factors to consider when selecting the right savings plan for your life goals:

  • Investment Term - When do you need the money back?
    • If you need your money back in say 10 years to pay your child’s college fees (for example), you must not choose a longer-term savings plan.
    • If you have no fixed term in mind, go for a non-contractual savings plan.
  • ETFs Vs Mutual Funds -
    • Savings plans that offer mutual funds need to be managed by a competent financial advisor.
    • Can you select the right mutual funds if your financial advisor leaves you for any reason?
    • Others offer only the S&P500 as an option (as recommended by Warren Buffett), where there is no possibility of human error.
  • Charges - Savings plans typically have two types of charges;
    • Product Charges - Some products have very low charges, some are reasonable, while other have very high charges. Be careful when selecting the right savings plan.
    • ETFs or Mutual Fund Charges - ETFs can charge as low as 0.07% per annum, while mutual funds can charge as high as 3% per annum. Make sure that you select a portfolio that is low-cost, and diversified.
  • Guarantees - Decide what you want. Each person has a different personality when it comes to money. Some people will not invest without guarantees. Select a savings plan based on your personality.
    • Some plans don’t have capital or returns guarantees, so their charges will be lower.
    • Others offer capital and returns guarantees, but will have higher charges.

About the Author Amit

Amit is an Independent Financial Advisor, based in Dubai since 1997. He is part of the prestigious ‘Million Dollar Round Table’ (MDRT), which is an elite club of the best financial advisors worldwide. He has authored the ‘6-Step Financial Success Guide’, and the book ‘Creating, Preserving, Distributing Wealth’. He helps business owners and professionals ‘Create A Second Income’ through investments.

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