From Bonus to Bounty: Simple Steps to Growing Your Wealth in Your 20s
As a young adult, an annual bonus is a well-earned reward for your hard work. The question is: how do you make the most of it?
While it might be tempting to spend your bonus on things like holidays, gadgets, or another big-ticket purchase, it’s worth considering how you can potentially turn this into another income stream, helping you grow your wealth in the long term.
Of course, we’re not saying that you need to invest your entire bonus payout (but if you wish to do so, then thumbs up to you!), but rather to allocate a sensible amount to spend, and try to save or invest as much as you’re comfortable with…your future self will thank you.
The truth is, growing your wealth in your 20s isn’t that difficult. Here’s how you can start.
1. Spend, Save or Invest? Here’s What You Can Do with Your Bonus
When your bonus arrives, the urge to splurge on treats and experiences can be strong. Sure, you should reward yourself for your hard work, but is spending a large chunk of it the best move?
Let’s break down the options.
Option 1: Spending
Pros: Beyond necessities such as food, spending your bonus on “wants” is a nice reward for your hard work. This can be a good source of motivation.
Cons: Spending is fine for short-term joy. However, to strike a good balance between present and future financial goals, one should be prudent and consider saving and investing.
Option 2: Saving
Pros: Saving your bonus gives you a financial safety net for unexpected expenses or big future plans. Savings can provide peace of mind, especially in uncertain economic times. Insurance savings plans also offer a small element of insurance protection (where applicable).
Cons: While traditional bank savings accounts offer stability, base interest rates could be low and may lose out to inflation. This approach, while secure, limits the potential for significant financial growth. Investors with higher risk appetites may prefer to venture beyond to potentially reap higher returns.
Option 3: Investing
Pros: Investing allows your money to grow through compounding interests over time, with the potential to generate a return that’s higher than regular savings in the long run. It can be a good start to help you reach your bigger financial goals.
Cons: Investments tend to carry higher risk than savings products, and returns aren’t guaranteed. However, by taking a long-term view and diversifying, you’ll be in a better position to ride out fluctuations and uncertainties in the market.
How Then Should I Allocate My Bonus?
When allocating your monthly salary, the famous 50-30-20 rule is a useful estimate. This means that you can spend up to 50% on needs, 30% on wants, and at least invest or save the remaining 20% (or more). While you are young with fewer financial liabilities, spending less on needs could allow for higher savings.
For your bonus, if you can keep your “needs” and “wants” to a minimum, then a large chunk of bonus can be saved or invested to help you build your long-term wealth, or for big ticket items like a house and car.
One great way to potentially let your money work for itself is an investment-linked plan (ILP) with sub-funds that pays dividends. For instance, consider Income Insurance’s Invest Flex Vantage which provides the option to receive a potential income stream from the first policy year with dividend-paying funds1.
While there is no right answer as to how much you should save or invest, you can speak to an Income Insurance advisor to assess your financial situation and goals and get personalised advice.
2. Why Consider Insurance Savings & Investment-Linked Plans (ILPs) in Your 20s?
As life progresses, you’re bound to arrive at certain big milestones and financial responsibilities, such as getting married, buying a first home, or planning for a family. Just remember that getting adequate financial protection should still be a priority at this life stage.
Holistically Addressing Your Financial Goals
For young adults, protection coverage is another important often-overlooked aspect of financial planning.
Insurance savings plans and ILPs are attractive choices because they offer an edge over other non-insurance investment options on the market by including insurance coverage, typically in the form of life protection benefits. This helps contribute towards your holistic financial health and safeguarding your financial future beyond simply accumulating wealth.
For instance, Income Insurance’s Invest Flex Vantage provides life insurance protection coverage for death or terminal illness2. Such life insurance benefits offer additional peace of mind for you and your loved ones while you work towards your financial goals.
Income Insurance’s ILPs also allow you to flexibly top up3 your investment and switch funds4(Policy T&Cs apply), based on your changing financial needs in the long run.
3. What Plans Should You Get in Your 20s?
Look Out for Flexible Payment Plans for Long-Term Commitment
One common misconception of ILPs is that they are inflexible.
ILPs such as Income Insurance’s Invest Flex and Invest Flex Vantage offer benefits to ease up your investing journey, such as the flexibility to take a premium holiday5 at no charge for up to 120 months , from the 5th policy anniversary (where applicable).
This benefit5 can help keep your policy active temporarily, even if you’re unable to pay the premiums later in life due to a financial emergency.
Additionally, both Invest Flex and Invest Flex Vantage allow you to withdraw6 some of your investments at no charge when a specified life event occurs during the minimum investment period (MIP). MIP refers to the period you have chosen to pay regular premiums, and it cannot be changed.
For The Risk-Averse, Consider Savings Plans With Capital Guarantee
If you’re looking to grow your wealth while keeping your initial investment secure, then plans with capital guarantee7 such as Gro Cash Plus and Gro Cash Sure offer solid options.
These plans are designed to provide steady returns with the reassurance of guaranteed capital7, making them a great choice for those seeking both financial growth and a peace of mind.
In the case of Gro Cash Plus, you can even start receiving a lifetime of cash payouts of up to 6.59%^ of the sum assured from the end of the 3rd policy year till age 120.
4. Watch Your Bonus Grow with A Savings Calculator
Our online Savings Calculator helps you estimate how much your bonus could grow over time, making it easier to plan for the future. Conveniently work out how much you need to save regularly or as a lump sum, to achieve your savings goal.
You can even save a PDF version of your report, for your future reference or when speaking to an Income Insurance advisor regarding your financial goals and needs. Check out the calculator here!
So, Are You Ready to Grow Your Wealth?
Your bonus is more than just extra cash to splurge – it’s an opportunity to set yourself up for a stronger financial future.
Making the sensible financial decisions now can help you achieve your goals, protect your loved ones, and build a solid foundation of wealth.
Check out our insurance savings and investment-linked plans and feel free to speak to an Income Insurance advisor to get personalised recommendations on plans that best serve your financial goals and needs.
^ If the insured survives at the end of the premium term, and if all premiums for this policy have been paid for, Income Insurance Limited will start paying the cash benefit at the end of the premium term. Income Insurance may pay a cash bonus on top of each cash benefit by applying a bonus rate to the sum assured. Income Insurance may or may not pay this cash bonus for each policy year. The percentage of the sum assured for the yearly cash benefit is dependent on the policy entry age of the original insured. If the sum assured of the policy is at least $80,000, you can choose to receive the yearly cash payouts in monthly payments. You cannot change the frequency you receive the cash benefit (yearly or monthly) after the first cash benefit is paid out. If Income Insurance pays a cash bonus on top of a cash benefit, Income Insurance will treat the cash bonus and its cash benefit as one cash benefit. Please refer to the policy conditions for further details.
The illustrated cash payout of up to 6.59% of the sum assured is based on an original insured with an entry age of 30 to 39. The cash payout consists of a yearly cash benefit of 1.85% of the sum assured and a non-guaranteed cash bonus of up to 4.74% of the sum assured (based on the assumption that the Life Participating Fund earns a long-term average return of 4.25% per annum). At an illustrated investment rate of return of 3.00% per annum, the non-guaranteed cash bonus is up to 2.37% of your sum assured.
1 Dividend refers to the distribution of certain funds that have a distribution option that Income Insurance may declare. The policyholder will be entitled to receive these distributions if the policy has not ended and has units in these funds on the declaration date of the distribution. The distribution amount will depend on the number of units the policyholder holds in these funds on the date Income Insurance declares the distribution. The frequency and/or amount of distributions (if at all) may be varied at Income Insurance's absolute discretion. Distributions are not guaranteed. Income Insurance may or may not pay a distribution every year. If the distribution amount for a fund meets the minimum amount Income Insurance tells the policyholder, the policyholder can choose to receive all future distributions from that fund as payouts.
Distributions may be made out of the income and/or capital of the sub-fund. Any payout of distributions from the capital of the sub-fund may result in an immediate reduction of the net asset value per share/unit. Please refer to the policy conditions for further details on the declaration of distributions, reinvesting distributions, and the applicable terms and conditions.
2 If the insured becomes terminally ill or dies within one year from the cover start date, Income Insurance will pay the policy value less any bonus at the time Income Insurance was told about the claim. If the insured becomes terminally ill or dies after one year from the cover start date, Income Insurance will pay 101% of the net premium(s) paid or the policy value at the time Income Insurance was told about the claim, whichever is higher. Income Insurance will take off any fees and charges that apply to your policy. The policy will end when Income Insurance makes this payment.
3 For Invest Flex, Invest Flex Vantage, Invest Flex TriVantage products: Income Insurance may set a minimum amount for each top-up. Income Insurance will use 100% of the top-ups to buy units (at the bid price) in the funds the policyholder chooses. When Income Insurance works out any claim benefit, Income Insurance will not consider any top-ups made after Income Insurance is told about the claim. Top-ups do not form part of the regular premiums. The policyholder cannot make any top-ups when the policy is on a premium holiday.
For WealthLink: the initial Minimum Single Premium is $5,000 for age 0 to 64 and $10,000 for age 65 to 80. Subsequent minimum top up amount is $2,500. A premium charge of 3.5% will be deducted from both the initial single premium and top ups (if any).
4 For Invest Flex, Invest Flex Vantage, Invest Flex TriVantage products: The policyholder can switch between funds at any time. If the policyholder is not switching out of a fund completely, we may tell the policyholder to leave a minimum amount in that fund. We reserve the right to charge the policyholder a small amount and set a minimum amount for each switch. We may also limit the number of switches the policyholder can carry out. Please refer to the policy conditions for further details.
For WealthLink: Minimum switch amount is currently set as $1,000 each time. There is no limit to the number of switches per year. Income may change this at any time by giving you notice.
5 If the policyholder still has not paid the premium after the grace period, the policy will enter into a premium holiday. During this premium holiday, the policyholder can stop paying the premium provided the policy value is able to cover the fees and charges that continue to be due on the policy. The premium holiday charge may be payable during the premium holiday if it is within the MIP. From the 5th policy anniversary, the policyholder can take a premium holiday without any premium holiday charge up to the specified period, according to the MIP selected. Please refer to the policy conditions for further details.
6 During the MIP, the policyholder may choose to exercise a free partial withdrawal if the insured experiences a life event, subject to the policy’s terms and conditions. Please refer to the policy conditions for further details on the life events and the applicable terms and conditions.
7 At the end of the premium term, if the policyholder did not cash in this policy and all premiums for this policy have been paid for, the guaranteed cash value for this policy is equal to total premiums paid, excluding premiums paid on riders. If the policyholder chooses to cash in this policy partially, the sum assured after the partial cash payout cannot be less than the minimum sum assured limit or any other amount Income Insurance may tell the policyholder about. Income Insurance will use the new sum assured and reduced regular premium amount, excluding premiums paid on riders, to work out the guaranteed cash value (if any) from the policy entry date.
Investments are subject to investment risks including the possible loss of the principal amount invested. Before committing to the minimum investment period, you may want to consider how long is your investment expectations or needs and whether you are able to keep up with the premium payment should your financial situation change. Past performance, as well as the prediction, projection or forecast on the economy, securities markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of the ILP sub-fund. The performance of the ILP sub-fund is not guaranteed and the value of the units in the ILP sub-fund and the income accruing to the units, if any, may fall or rise. A product summary and product highlights sheet(s) relating to the ILP sub-fund are available and can be obtained from your insurance advisor or online at income. com.sg/funds. A potential investor should read the product summary and product highlights sheet(s) before deciding whether to subscribe for units in the ILP sub-fund.
This is for general information only. The precise terms, conditions and exclusions of any Income Insurance products mentioned are specified in their respective policy contracts. All our products are developed to benefit our customers but not all may be suitable for your specific needs. If you are unsure if this plan is suitable for you, we strongly encourage you to speak to a qualified insurance advisor. Otherwise, you may end up buying a plan that does not meet your expectations or needs. As a result, you may not be able to afford the premiums or get the insurance protection you want. Buying a life insurance plan is a long-term commitment on your part. If you cancel your plan prematurely, the cash value you receive may be zero or less than the premiums you have paid for the plan.
This article is meant purely for informational purposes and does not constitute an offer, recommendation, solicitation or advise to buy or sell any product(s). It should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income Insurance products mentioned are specified in their respective policy contracts. Please seek independent financial advice before making any decision.
These policies are protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact Income Insurance or visit the GIA/LIA or SDIC websites (www.gia.org.sg or www.lia.org.sg or www.sdic.org.sg).
This advertisement has not been reviewed by the Monetary Authority of Singapore.
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