Charting your savings strategy, Insurance as an investment

My husband and I want your advice on whether our savings plan is appropriate.

1. We each bought long-term equity funds (LTF) at 15,000 and 12,000 baht a month.

2. We have also bought retirement mutual funds (RMF) of 10,000 baht each.

3. We both have a 24-month fixed-deposit account of 25,000 baht per month.

4. We also have set up savings funds for our three children by opening five-year Teen PLus savings accounts for all of them, at 10,000 baht per month per account (in the past we gained a return of around 30,000 baht from total savings of 600,000).

The figures above add up to total savings of 127,000 baht a month, so I think we will invest in a variety of funds. Is this a good idea?

_ Oh

ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA Without a proper financial plan, your current savings strategy is a bit like a ship without a rudder. When you set out on a financial journey, it's always useful to decide on the destination first, then find out the distance and finally decide on which investment vehicles to take.

A good starting point is to prioritise your goals such as retirement needs, college funding, wealth protection, etc. By using your current budget as a starting point, your financial planner can help you to come up with a fairly good estimate of what your expenses are likely to be during your golden years. For people in your position, the numbers can be shockingly large. A target of 15-20 million baht is not too far-fetched.

Once the target is set, then you can work out how much to put into your retirement savings vehicles such as LTFs and RMFs. I would suggest you make full use of your LTF tax deduction, which comes to 15% of gross income or 500,000 per year, whichever is lower. If your employer offers a provident fund, I would take advantage of that as well. Whatever is left over from your provident fund contributions can be put into RMFs.

The next step is to choose the investment vehicles. All LTFs are equity-based. So I would recommend using low-cost index funds as your core holdings, and perhaps spicing up the performance a bit with actively managed funds with good long-term track records.

RMFs offer more choices from fixed income, balanced to equity. Depending on your investment horizon and risk tolerance, I would still suggest equity funds as the primary choice.

The same principle can be applied to your college funding needs. Your time horizon and the ages of your children will play an important part in choosing the right education funding options.

Your financial planner should be able to guide you through a step-by-step approach in analysing the various investment alternatives and strategies that will suit your needs.

My friend convinced me to buy life insurance. I have never invested in anything and my discipline is relatively poor, so I'm thinking about buying a policy. But I wonder what's the difference between insurance, which she claims is a good savings tool, and a bank deposit? Is there anything else I can do to save?

_ Pep

ANSWERED BY... Chartchai Meesukko, CFP Life insurance and bank deposits play different roles in financial planning. Bank savings provide liquidity so we can use the money whenever we want, with the bank paying some interest, which is higher the longer you keep the money in the bank without withdrawing it.

Saving through life insurance usually requires a long-term commitment such as 10, 15, or 20 years.

Although we may earn more than bank deposits (we should because of the longer time commitment), quitting before the contract ends, e.g. to stop paying premiums after five years for a 20-year plan, could end up losing us some money.

Moreover, premiums for insurance savings in Thailand include the cost for life protection, which may be unnecessary if we don't really want it. Therefore, in terms of investing or savings only, buying insurance might not be very attractive.

However, that long-term commitment may help those people who are not really financially disciplined to save money for the future, and if they also need some life protection, insurance could be a good option.


The Thai Financial Planners Association is the certified financial planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted to them through wealthcare@bangkokpost.co.th or posted at the TFPA web board at www.tfpa.or.th

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Writer: Thai Financial Planners Association