You don’t really think about financial products until you need them. It’s a bit like buying the necessary tools only when the need arises.
You open a savings account when you need to save or get a credit card when you decide to earn cashback. That said, just because this approach works for you doesn’t mean you can’t do better.
The term “financial toolkit” was recently used by a popular financial blogger to refer to financial services that have helped him manage his money more effectively. Likewise, building your own financial toolkit can help you budget your money better.
What tools do you need?
If you are looking in your home toolbox, there should be a hammer, wrench, and many types of screwdrivers. These tools should be enough for you to do minor DIY repairs around the house.
Likewise, your financial toolkit needs items that can cover most of your day-to-day financial needs.
Do you have any of these products in your financial toolbox?
- Savings account
- Credit card
Getting the right financial tools is the first step. However, you need to know how they fit together to give you better financial security and stability.
A savings account that gives you more
Have you ever thought about the place of a savings account in your financial plan? What does this do for you besides being a place to receive funds?
For starters, it can help you manage your finances. For example, if you are working on the 50/30/20 budgeting system, you can easily open three different accounts to manage them. One account for needs, one for wants and a third for savings. This ensures that you don’t accidentally use money from one category for the wrong purpose.
For your daily expenses, make sure you have a savings account linked to mobile banking. This will allow you to consolidate all your payments and invoices. For medium-term cash flow, look for an account that offers flexibility and high interest rates. This provides quick access to your money if you need it. For long term savings, shop around for the best fixed deposit rates.
Insurance that goes beyond protection
The Malaysian Life Insurance Association reported that only half of Malaysians had a life insurance policy. Of the half of those who have a policy, 90 percent do not have sufficient coverage for themselves and their loved ones.
Insurance is a financial relief plan for unfortunate events like serious illness or an accident. You might not think you need it now, but ask anyone who has faced a large medical bill without insurance, and you will think otherwise.
If you are looking for a reliable insurance policy, bancassurance is a great place to start. They offer long-term savings plans with protection for health, education, retirement and even multi-generation savings products. Certain bancassurance products also provide for a premium waiver in the event of an unforeseen event during the term of the policy.
Due to the pandemic, more and more Malaysians have moved online for their daily transactions. At the same time, attacks in cyberspace have also increased, thus reinforcing the need for us to protect ourselves online.
Did you know?
Insurance can also protect you from the financial fallout of cybercrime. They can insure you against online extortion, fraud, and identity theft, and cover damage to your computer caused by malware.
Find a credit card that rewards your lifestyle
Credit cards are one of the most flexible financial tools available. It’s not just about buying things first and paying for them later. Credit cards can also help you manage emergency spending.
Some of the main benefits of getting a credit card are:
- Earn cashback from your daily expenses
- Earn bonus points; that can be redeemed for rewards
- Earn airline miles for airline tickets and seat upgrades
- Access discounts and promotions reserved for cardholders
- The ability to convert your expenses into interest-free installments
- Credit balance transfers that allow you to reduce your monthly commitments by saving on high interest rates
In addition to choosing the right card to meet your needs, spend wisely and pay your payments on time. Managing your credit card effectively helps improve your credit rating. A solid track record will improve your financial situation and show financial institutions that you can pay your bills on time.
This is important if you plan to apply for more loans later on, such as buying a house or a car. A better credit rating gives you better access to better loans with lower interest rates.
Loans to carry out your projects
Getting a loan is something everyone ends up doing at some point in their life. Having a loan allows you to preserve your money in an emergency. It will also help you improve your credit rating so that you can take advantage of better interest rates if you need to.
There are many types of loans, such as auto loans, personal loans, and traditional mortgages. If you’ve paid off your home loan, you can always take out a second mortgage on your home to improve your cash flow or invest that money to further increase your wealth.
Some loans allow you to consolidate all of your loans into one account. This means that you only need one interest rate instead of going through different payment schedules and interest rates.
Make sure you understand the type of loan you need. Talk to the right specialist and choose a loan that’s right for you.
The right investments to make money grow
So far, we’ve looked at financial products that save you money, offer protection, or help you pay for large expenses. In this regard, investments are different because it is a method of growing your wealth.
Most of us have an employee provident fund (EPF) account as a form of savings, but that may not be enough. We need to consider another source of funding for our retirement.
Many people often confuse wealth management with the affluent segment. This is a myth. You can start your investment journey with any amount, even starting as low as RM100 per month!
Investments come in the form of stocks, bonds, currencies, commodity markets, and cryptocurrencies. Your goal is to buy securities that will increase in value over time, and then sell them when you reach or need your savings goal. If the idea of stocks, bonds, and commodities sounds daunting to you, you may want to consider investing in a unit trust.
A unit trust is one of the best forms of investment for a non-financially savvy person. It is a form of investing where professional fund managers specialize in generating long-term returns through local and global stocks and bonds. There are many types of investment themes that you can choose from.
By investing RM100 every month, it can snowball in the long run. Here is how many RM100 savings and investments each month with a 6% annual rate of return can yield in 20 years:
Example of an investment calculator using www.calculator.net/investment-calculator.html
The magic is in the compound interest on the money you save and invest. Saving RM100 per month will earn RM24,000 in 20 years. With investments, you can increase this amount to over RM 45,000!
The important thing at the start of your investment journey is to understand the following:
- Your goals
- Your risk profile
- Your calendar for investments
Choose the right product for yourself. Don’t accept rumors. Trust the professionals to manage your money.
Have a plan to equip your financial toolbox
All of this information might not be new to you, especially if you already know what each of these financial products does. However, the way you compose it can benefit you.
The following table shows how the different financial products can be used to create a more robust financial platform for you:
|Credit rating||Credit card, loan|
|Emergency expenses||Credit card, savings, insurance|
|Heritage creation / protection||Investments, savings account, insurance|
Having multiple products for each category gives you options in every situation. Having a credit card, savings account, and insurance increases your level of protection in an emergency. The same is true if you plan to build and preserve your heritage.
Alliance Bank understands that everyone is at different stages of their life and has different financial needs. They recently launched their Step-Up Your Game Cashback campaign, which allows you to develop any type of product you need. You can customize your own financial toolkit, whether it’s an investment, consolidation loan, or savings account.
This promotion includes attractive cash back rewards of up to RM500 and desirable interest rates on your savings of up to 8% per annum *
* General conditions apply.
Here’s how you can build your financial toolkit and maximize your benefits with progressive cashback rewards:
- Receive a RM50 discount if you sign up for 1 participating Alliance Bank product.
- Receive an additional RM 150 refund if you sign up for 2 participating products.
- Receive an additional refund of RM300 if you sign up for 3 participating products.
Interest on their loans is as low as 3.99% per annum, and their deposit rates can earn up to 8% per annum.
Follow the link to learn more about Alliance Bank’s Step Up Your Game cashback campaign, or if you’re just looking for new solutions to help you top your bag of financial stuff.
You will benefit from a single solution for all your financial needs by consolidating all your accounts with a single bank. In fact, Alliance Bank also recently launched its e-KYC solution. With this, you can apply for your ideal savings account, personal loan, or credit card without having to enter a physical branch. Simply download the allianceonline mobile app and scan your NRIC. It saves you time and protects you during the pandemic.
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