Long-term investments make your money grow

SOME consumers associate insurance companies only with death or funerals and do not know they can also save through an insurancecompany.

Insurance companies offer more than just risk products that help protect against things going wrong.

They also offer investment products that aim to help make your money grow. Here are the differences between saving and investing:

l Saving is for short-term goals like December holidays or paying for 2011 school fees upfront in January.

Saving means you won't go into debt when you want or need something costly.

In addition to opening a savings account at a bank, it's wiser to save for the future by investing with any reputable insurance company.

l Investing is saving for long-term goals like retirement or your kids' tertiary education. Investing is a good way to build your wealth, so you can own your life and be financially free.

To save enough for the future you need to invest your money for 10 years or more so it can grow.

This could be an endowment policy or a retirement annuity through your insurer, who will put your money in shares, property or government bonds, for example. Endowments are good for long-term goals like buying a house or saving for your children's tertiary education.

l Endowments are a good idea to help you save a set amount every month to reach your goal. It works.

A colleague who took out an endowment policy 10 years ago cashed it in December to pay transfer fees for the house she was buying.

She was also able to refurbish the house and buy furniture with the money.

You can access the money twice in the first five years but you should try not to touch it until the policy ends. There is also a guaranteed endowment that is risk-free and will give you a minimum return so you won't lose any money. A non-guaranteed endowment is more risky because it means you could lose money, but you could also make a lot.

Endowments are a form of contracted saving. That means you must save for a specific time, say for five years. Payouts are tax-free, but if you take out your money early, you will be charged, but not taxed.

l A retirement annuity (RA) gives you an income when you retire, and you cannot touch it until you are 55.

It's good to get an RA when you are young so the little you put away will grow. It is forced saving that helps you to be disciplined.

RAs are a clever way to invest as they give tax advantages. When you retire, you will get a monthly or lump sum payment so you can be independent.

Contact a financial adviser to help you find the best way to reach your goals.