4 Financial Considerations Often Overlooked By Undergraduates
As graduation draws near, you are excited and perhaps a little afraid of the future. Click here to find out what most undergrads overlook in personal finance.
Many students will grow up without ever thinking much about insurance or any form of personal finance. Even for those who are covered by such policies, it is usually purchased by their parents on their behalves.
When asked about insurance in general, most undergraduates know of its existence but know very little outside of that it’s for the most adverse of situations. Many lack the knowledge of the types of insurance and the types they should be considering.
1. Importance of insurance for graduates
Factors to consider
Most undergraduates are in their twenties or late teens
Male graduates are generally 2 years older from their female counterparts from the same batch
Lack of personal savings, since they haven’t started full time work or have just began working
Some of you might be thinking, “Why do I need insurance now since I am still so young? I am in the best shape of my life!”. But accidents and unexpected health issues may arise, taking away the ability to work. Bringing about many problems such as:
Large medical bills and hospitalization fees
Inability to work
These types of things can occur regardless of your age, thus it is better to be prepared for such circumstances. And perhaps the most important factor: it is CHEAPER to buy when you are younger and in good health since insurance premium will be lower.
2. The types of insurances
● Term Life
Up to a specific period of your choosing (e.g. until 65 for retirement)
Provides death benefit, a lump-sum payment upon death during the period
Cheaper premium compared to whole life
● Whole Life
No maturity date, covers as long as you live
Death benefit upon death to your beneficiaries
Premiums paid is higher than term life
Builds cash value
There are also participating and non-participating policies:
Participating policies will pool together the premiums from all policyholders (including you), which they will then use to invest in equities, corporate bonds, government bonds and other assets.
The returns generated will be how the bonuses are derived, but remember that they are not guaranteed.
To know more about the types of non-guaranteed bonuses read this.
3. The costs of insurance
Surely the first thing that most undergraduates will think, is that all of this sounds great, but how much does it actually cost?
Well unfortunately, there is no single answer for this. The premiums that you have to pay will depend on:
Whether you smoke or not
Age (As mentioned before, younger is cheaper)
*Riders are add-ons to your life insurance, one example is critical illness rider (pays a lump sum when diagnosed with critical illness – which varies with provider)
4. Credit cards
Credit cards often get a bad reputation for making people overspend and fall into debt.
But credit cards can actually help you to save money. There are a large variety of credit cards that offer
Special discounts for selected merchants
One example is the Unlimited CashBack Credit Card by Standard Chartered with its main feature being 1.5% cash-back on any purchase with no cash-back limit. Another would be UOB One Card with rebates on Grab rides and Singapore Power utility bills.