Paying tuition fee using AIA Smart Wealth Builder
Recently I recommended the AIA Smart Wealth Builder (II) to someone who was looking to purchase an endowment plan for his new born child for the purpose of paying university tuition fee.
When he came to me for advice, he already has a quotation for NTUC Income Gro Saver Flex. That quotation stated that for $40,000 of one-time premium (i.e. single premium), the maturity value at the end of 20 years was $43,680 (guaranteed) and $79,366 (projected at 4.25%).
As an IFA Rep, what I did was to find out his risk appetite. It turns out that he was extremely conservative with zero knowledge of investments. He specifically only wish to consider endowments.
With this, it means that I cannot recommend other investment products such as stocks and ETFs which offer a high return but comes with a much higher risk.
His financial situation was also such that he preferred a single premium instead of regular premium.
Hence, I ran some comparisons for the following products:
- NTUC Income Gro Saver Flex (20 years endowment)
- AIA Smart Wealth Builder (II) (SP) (124 years endowment)
- Manulife ReadyBuilder (II) (119 years endowment)
- SingLife MyChoiceSaver (20 years endowment)
The AIA Smart Wealth Builder (II) and Manulife ReadyBuilder (II) may appear to be weird since the policy term exceeds more than one century! However, this kind of endowment is known as long-term endowment is meant to be surrendered at the appropriate time. This means that it offers the client the flexibility to surrender the policy if it he needs it. If he does not need the money, the policy can continue to earn “interest”.
At the end of the day, I recommended the AIA Smart Wealth Builder (II) (SP) which surrender values at the end of 20 years was $44,800 (guaranteed) and $79,799 (projected @ 4.25%). These values were slightly higher than NTUC Income Gro Saver Flex and yet the it offers the flexibility to continue with the plan or surrender it depending on the financial situation of the client.
Personally for me, I do not use endowment to plan for my children's education. I invest instead. And that is because I am knowledgeable and expert in investments. However, this may not be true for you. If in doubt, write to me for a formal consultantation before you do anything.
By the way, you may also want to refer to this article on how I do financial planning for young families:
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