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Weddings in Singapore cost tens of thousands of dollars - and that's only for the basics. If you don't want to take a loan for your wedding, then saving up for it is the way to go. However, base interest rates provided by banks are at a measly 0.05 per cent. When you consider the fact that the inflation rate is around 3 per cent, your savings will be worth less by the time you're ready to tie the knot.

Endowment plans offer higher base interest rates to grow your savings faster. They are also structured to help you save regularly while providing you flexibility to meet financial needs that arise.

Read on to find out how to use an endowment plan to save money for your wedding.

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How Much Does a Wedding Cost in Singapore?

Holding a wedding in Singapore is no minor affair, both emotionally and financially. Even if you're not one of those entitled brats that think the whole world owes them a fancy wedding, expect to pay anywhere from S$30,000 to S$50,000.

Here's what a typical wedding budget might look like:

Diamond ring (for proposing) and wedding bands (for exchange on the wedding day) - S$5,000

Bridal package - S$3,000

Photography and videography - S$3,000

Wedding banquet (20 tables) - S$24,000

Total: S$35,000

What is an Endowment Plan?

An endowment plan makes it easy for the average Singaporean to save and invest their money. They are a financial product offered by insurance companies, but they are focused on savings, not protection.

To entice you to sign up, insurers offer higher base interest rates than the banks. The catch is that you have to commit to saving regularly for at least 15 years.

Because many Singaporeans are afraid to lock up their cash for this long, endowment plans allow you to withdraw a portion of your account during the savings period. This makes it an ideal tool for saving money for your wedding.

Basically, your endowment plan splits up your premiums (40:60) into two accounts - a fixed account and a flexible account. The fixed account earns a higher interest rate than the flexible account.

Withdrawals can only be made from the flexible account and usually from the third year onwards.

How Does an Endowment Plan Help Me Save For My Wedding?

To better understand an endowment plan, let's take a look at one in action.

Amber, 21 years old, wants to settle down and have a family by age 36. She can save around $400 per month. An endowment plan for her could look like this:

Endowment Plan for Amber

Term: 15 years

Premium: S$400/month, or S$4,800/year

Guaranteed returns: 3.25 per cent

Non-guaranteed returns: 3 per cent

At 31, Amber decides to get married. At this point, she has already maintained her endowment plan for 10 years. She can withdraw from her flexible account from Years 2 to 9, which amounts to approximately S$29,000, with interest of 3 per cent. This is enough to cover most wedding expenses.

Five years later, at 36, Amber decides to start a family. Her endowment plan has also matured, paying out all the premiums she had paid over 15 years plus interest, less the amount withdrawn in Year 10. Amber decides to use this money to prepare for the arrival of her new child.

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