Here's how much FREE will cost you

Who doesn't like free things, right?  Free vacation, free medical coverage, free lunch.  Well, believe it or not there are many people who would be begging you to take this free offers, if only you promise you'll let go of your calculators, and switch off your brain.

Here's my story and I'm sure its yours too.  OK, so I received this phone call from a telemarketer, who's promoting a health package for credit card users from bank ABC (haven't we all?).  I usually would just end the conversation politely saying I'm not interested, I've got all the coverage I need, thank you. 

But this time, I chose to listen, as I happen to have sometime to kill.  So, this telemarketer said that ABC company is offering FREE health coverage, hospitalisation and all the works.  It's FREE, ok, so I don't have to pay anything.  So, I listened on, waiting for the catch.  Now, here's the catch...I will get these free medical coverage if I start a savings programme of about RM200 a month.  The money is all mine, and at the end of 15 years, I will be able to withdraw all the money back.  All RM36,000 of it, he said. (RM200 x 12 months x 15 years)  Even if I had claimed any converage within that period of 15 years, my money will still be intact.  So, do I believe that they will be so kind as to give me all my money back and provide me with free health coverage?  Of course, they will.  It makes perfect business sense to them.  And here's why:  (Time to bring out that calculator!)

Say for example, you put in the same amount to your own unit trust investment account, let's say ASB.  ASB provides on average about 8% return every year and it is compounding every year.  At the end of the 15th year, you will actually get about RM65,000 in your investment account, instead of RM36,000 that the ABC company would be so happy to return to you.  In other words, your RM36,000 has  generated  RM29,000 profit for you in the period of 15 years.

So....by putting the money into ABC company's savings programme,  you will get back your RM36,000 after 15 years, and the ABC company will have made RM29,000 or more (depending on where they invest the money) for themselves.  So, in layman terms, you are NOT getting FREE health coverage, it is company ABC, that will be getting FREE money from your so-called savings. 

So, I said thank you but NO thank you, I do not intend to give you my money.   It's true what they say...if you do not know what to do with your money....there are tonnes of people who know exactly what to do with the money (Actually, I'm the one who said that in my book, from Deadbroke to Cash Rich).  So, before you say yes to any FREE deals or "you-can-get-all-your-money-back" deals...just pull out your calculator and switch on your brain.