let say for the next five years I save up $2187.96 per year or
$182.33 per month for a policy running at 5.25% interest p/a
compounded yearly.
at the end of five years.
First Year - P: $2187.96, I: 5.25%, End Sum: $2302.8279,
Interest Earned: $114.8679
Second year - P: $2187.96 + $2302.8279 = $4490.1879 , I:
5.25%, ES: $4725.9227, IE: $235.7348
Third year - P: $2187.96 + $4725.9227 = $6913.8827, I:
5.25%, ES: $7276.8615, IE: $362.9788
Fourth year - P: $2187.96 + $7276.8615 = $9464.8215 ,
I: 5.25%, ES: $9961.724629, IE: $496.9031
Fifth year - P: $2187.96 + $9961.724629 =
$12,149.6846 , I: 5.25%, ES: $12,787.5430, IE: $637.8584
At the end of the five years, I would already saved $12,787.54.
And earned $1848.343. That is if market rate do not fall, any rise
would result in more money. However, the downside is the possible
inability to pay the monthly premium during the third and fourth
year due to NS liability. But if I'm not clamped down by a contract
and run everything from a 0.25% interest rate. The total interest
earned should be about $27. If I run a 0.6% for 3 years. with the
same lump sum of $10,939.80. I get about $65 which is still lower
than the $1.8k.
Weighing the
pros and cons
Contract-Tied - Possible inability to pay premium and be imposed
penalty, Almost financially crippled during NS years, high pay-outs
at the end of policy with option to continue running for another 20
years hence getting almost $30,000 back.
Non-Tied - Financial freedom, low interest pay-out.
Which do you think if beneficial? I think signing the policy is
good for long term but for short term, it's better to not get tied
down financially without a stable income. My main aim is to be able
to pay for my Uni fees in future and definitely $12,787.54 is not
enough however, the policy allows you to change your monthly
premium thus allowing more pay-outs. Hmm...
P = Principle
I = Interest Rate
ES = End Sum
IE = Interest Earned
