Effectively allocate assets to overcome inflation giants

        Many people often choose to 'save money' as their first step in financial management. Watching the numbers in the bank account gradually increase does indeed bring a sense of security and achievement. However, simply depositing money does not necessarily accumulate wealth, as there is another easily overlooked factor - inflation. This issue of 'Finance Column' explains how to ensure stable asset growth while safeguarding family safety.

        Saving money ≠ accumulating wealth. Purchasing power is the key

                In recent years, interest rates in Taiwan have remained consistently low, with bank fixed deposit interest rates often only about 1%, while prices have been rising year by year. I believe many people have noticed that in the past, a bowl of beef noodle soup only required NTD 120, but now it requires NTD 180; Previously, one month's living expenses could support all expenses, but now it's a bit tight. Although salary levels have increased, not all industries and groups can keep up with the rising prices, which has made many office workers generally feel that 'their income has increased, but their lives have not become easier'.

        According to data from the Directorate General of Budget, Accounting and Statistics, the annual growth rate of the Consumer Price Index (CPI) in 2025 is approximately 1.66%. At first glance, the increase may not seem high, but if the time is extended, the cumulative impact becomes apparent. For example, ten years ago when NTD 1 million was deposited, but prices rose by 1.5% annually, without considering interest income, even though the book still had NTD 1 million ten years later, the actual purchasing power was only about NTD 860000, which is equivalent to the hard-earned money shrinking by 14% unconsciously.

        Therefore, the focus of financial management is no longer just on "saving money well", but on thinking about how to maximize the use of funds. This does not mean that one must bear high risks, but rather consciously plan the allocation and use of funds, so that every penny can bring actual value, rather than just lying quietly in the account.

        Do you truly understand the essence and importance of asset allocation?

        When it comes to financial management, many people's first question is: 'What should I buy now?' However, in professional financial planning, a more effective sequence should be to first clarify goals and risk tolerance, and then choose the appropriate tools. The essence of asset allocation lies in the hierarchical management of funds with different purposes, some of which are used for short-term liquidity needs, such as daily living expenses and emergency reserves; Some funds undertake medium - to long-term growth tasks, such as investing in stocks, funds, and real estate; Others are used to cope with unexpected life risks, such as medical, accident, life insurance and other protective products.

        If all funds are concentrated in a single tool or purpose, although the operation is simple and the safety is high, the flexibility and efficiency of the funds may be insufficient, and it may not be possible to simultaneously balance short-term liquidity, asset appreciation, and security needs. The overall financial management effect may not be as ideal as hierarchical allocation. For example, if all funds are kept in fixed deposits, although the risk is low, it may not be possible to immediately cope with large expenditures in the face of unexpected situations; If all high-risk investments are invested, although there is a chance to obtain high returns, the psychological pressure and loss risk are relatively high when encountering market fluctuations.

        The goal of asset allocation is to allocate funds reasonably to different tools and purposes based on individual needs, life stages, and risk tolerance, achieving a financial management effect of "steady growth and controllable risks".

        Changes in Life Stages and Financial Strategies

        As life progresses, financial strategies naturally need to be adjusted. In the early stages of their career, although their income may not be high, most people have a relatively simple lifestyle and less responsibility. When facing asset fluctuations, they also have relatively ample time to adjust and re accumulate. At this point, one can take moderate risks and pursue asset growth.

        After getting married and starting a business, mortgage payments, children's education, and family living expenses gradually increase, and the financial focus often shifts from "hoping for rapid asset growth" to "hoping for stable life and controllable risks". Especially when multiple family responsibilities coexist, without prior planning, unexpected situations can often have a significant impact on family life. For example, if the main economic pillar of a family experiences income interruption due to accidents or illnesses, it will inevitably increase financial pressure such as mortgage, living expenses, and children's education expenses. If risk planning is done in advance, it can not only maintain the original quality of life, but also provide necessary support for family members in critical moments.

        Balance between psychological tolerance and theoretical reward

        Many investors may overestimate their level of calmness in the face of market fluctuations. When there are losses on their books, anxiety and panic can easily affect their judgment, leading to frequent market inflows and outflows, which in turn erode the long-term results that should have been accumulated. For example, some people see a decline in their investment targets and rush to sell, which may result in missing the opportunity for a subsequent rebound; Some people, due to their excessive pursuit of high returns, invest in high-risk goods that they cannot afford, resulting in financial losses. Therefore, the truly suitable financial allocation is not the most eye-catching high return plan, but an allocation that matches one's own psychological tolerance. While increasing asset value, it can also balance risk tolerance and family security.

        The role of high multiple life insurance in asset allocation

        The reason why high multiple protection life insurance is gradually regarded as an important risk management tool in asset allocation is mainly based on the concept of insurance leverage. Through relatively reasonable and controllable premium expenditures, it can exchange for high protection several times the premium, and transfer the risks that families cannot bear during the peak period of responsibility in advance, including major income interruption, forced asset realization, sudden decline in quality of life, and even the pressure derived from future asset inheritance.

        From a practical perspective, the insurance leverage ratio can be measured by the ratio of the first year life insurance coverage to the first year premium. The coverage ratio is not a fixed value, but depends on the product design and individual insurance conditions, and varies with age, gender, and payment period. For example, many middle to high asset families have complete asset allocation, but their cash flow is relatively tight. Once their main source of income is interrupted, housing loans, investment loans, daily living expenses, and children's education expenses immediately become a heavy burden. High multiple life insurance can establish a safety net sufficient to support cash demand through comprehensive asset allocation, avoiding being forced to dispose of assets at low prices in critical moments, thereby enhancing overall financial resilience and psychological resilience. Even if the risk has not occurred, the gradually accumulated value in the policy can be converted into important backup funds for retirement or later life in the future.

        From the perspective of asset inheritance, insurance has long been regarded as an important inheritance tool by high asset families due to its clear payment, high flexibility in beneficiary arrangements, and good execution efficiency. If paired with a high multiple protection design, under the same budget conditions, it can strengthen the protection left for the next generation and provide long-term care and support through installment payments, without relying on complex legal structures or high procedural costs.

        Security as a foundation for wealth in the long run

        The key to accumulating wealth is not only to save money or invest, but also to ensure stable growth of assets while safeguarding family security. To promote financial literacy education, Far Eastern International Bank has launched a podcast program titled "Ten Delights Without Setting Up. Money Enters Life" with the theme "Let's Get to Know the Insurance Wallet Together", leading everyone to understand how to make good use of the "Insurance Wallet", assist in reorganizing and reviewing the current insurance protection status, and have a clearer understanding of the overall protection configuration. In addition, this article also cites the viewpoint shared by guests in the podcast program - "Insurance is actually different from what you think", from a life perspective, to explain how insurance configuration should be matched with different life stages and risk needs in order to better meet the needs. Welcome everyone to listen and learn about the thinking behind insurance together.

        If you want to further understand insurance products, please feel free to contact any branch of Far Eastern International Bank, or call the Far Eastern International Bank Wealth Management Hotline at 0800-261-732 (limited to local calls) or (02) 8073-1166, and a dedicated person will serve you. For more related content, please click on the link to listen to the exciting program.

                *Image source: freepik

        #