"Deposit 500,000 Won a Month, Get Up to 22.55 Million Won?"... What Is the New Installment Savings Available from June? [The Essentials of Benefits]

Youth Asset-Building Product Launching in June
Check Eligibility for Government Contribution and Tax Exemption Benefits

Editor's Note"The more you know, the more you see, and the more you save." Even in this age of information overload, there are still many things that might pass you by unnoticed. [The Essentials of Benefits] delivers useful news and tips that can earn you money if you know them, but could cost you if you don't.

#A, an office worker in their 20s working in Seoul, tries to set up savings plans every payday, but finds it difficult to save as much as hoped. This is because after fixed expenses such as rent, food, and transportation, not much is left. After hearing about the 'Youth Future Installment Savings' product launching in June, A decided to check whether they could receive government matching contributions and tax-exempt benefits.

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The Youth Future Installment Savings, a new policy-based financial product to help young people build assets, will be launched next month. According to the Financial Services Commission, Youth Future Installment Savings is a three-year maturity, free-installment savings product allowing flexible monthly deposits up to a maximum of 500,000 won. The government matches the amount deposited by the participant with its own contribution, and interest is paid on both the participant’s deposits and the government matching contribution. Interest income tax is exempt.

Up to 500,000 won per month, 3-year maturity... Government contribution of 6-12%

The biggest feature of Youth Future Installment Savings is the government matching contribution. There are three main types of enrollment: general type, preferential type, and non-matching type. The general type offers a government contribution of 6% of the monthly deposit, while the preferential type offers 12%. For those depositing 500,000 won per month, the general type would receive a monthly contribution of 30,000 won, and the preferential type 60,000 won.

The Financial Services Commission announced that the basic interest rate will be 5%, with an additional 2-3 percentage points as preferential rates depending on the financial institution, resulting in a maximum interest rate of 7-8%. Considering the government contribution and tax exemption, the general type effectively offers up to 13.2-14.4% simple interest, and the preferential type up to 18.2-19.4% simple interest, according to the Commission.

If you deposit 500,000 won monthly for three years, the principal will be 18 million won. Based on an interest rate of 8%, the Financial Services Commission explained that the general type would yield a total of 21.38 million won (18 million won principal, 1.08 million won in government contribution, and 2.3 million won in interest), while the preferential type would yield 22.55 million won (18 million won principal, 2.16 million won in government contribution, and 2.39 million won in interest). However, the actual amount received will vary depending on the enrollment type, applicable interest rate, and deposit amount.

Am I General or Preferential Type?

Applicants must be young adults between the ages of 19 and 34. For those who have completed military service, up to six years of service can be excluded from the age calculation. The income thresholds are: annual salary of 75 million won or less, or comprehensive income of 63 million won or less, or small business owners with annual sales of 300 million won or less whose household income is no more than 200% of the median. Those who have been subject to comprehensive financial income taxation at least once in the last three years are not eligible.

To receive the government matching contribution, you must meet stricter income criteria. For the general type, you must have an annual salary of 60 million won or less, or comprehensive income of 48 million won or less, or be a small business owner with annual sales of 300 million won or less and household income no higher than 200% of the median. In this case, you will receive a government contribution of 6% of your deposit amount.

The preferential type has stricter requirements but offers greater benefits. Eligible applicants include employees of small and medium-sized enterprises with an annual salary of 36 million won or less, or comprehensive income of 26 million won or less, or small business owners with annual sales of 100 million won or less whose household income is no more than 150% of the median. Newly employed workers at small and medium-sized enterprises who meet the general type income criteria are also eligible. For the preferential type, the government matching contribution is 12% of the deposited amount.

On the other hand, those whose annual salary falls between 60 million won and 75 million won are not eligible for the government matching contribution, but will still receive the tax exemption on interest income. Therefore, before enrolling, you should check not only your age but also your own income, household income, employment status, and whether you are a small business owner.

Applications Open via Bank Apps in June... Consider Existing Youth Leap Savings Accounts

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Youth Future Installment Savings can be applied for non-face-to-face through financial institution apps starting in June. The Financial Services Commission plans to accept new applicants in June and December this year. The application process is carried out via the financial institution’s app, and eligibility will be verified electronically through links with the National Tax Service and other relevant bodies without the need for additional document submission.

A total of 15 institutions will offer the product. In addition to Industrial Bank of Korea, NongHyup Bank, Shinhan Bank, Woori Bank, Hana Bank, KB Kookmin Bank, iM Bank, Busan Bank, Kyongnam Bank, Gwangju Bank, and Jeonbuk Bank, Suhyup Bank, KakaoBank, Toss Bank, and Korea Post will newly participate. However, the preferential rate offered by each institution may differ based on transaction history and usage conditions, so you should check the final announced rate.

If you already have a Youth Leap Savings Account, you should also consider whether you can switch to this new product. The Financial Services Commission does not allow double enrollment in both Youth Leap Savings Account and Youth Future Installment Savings. However, during the initial enrollment period in June, switching from the Youth Leap Savings Account to Youth Future Installment Savings will be permitted. In this case, the transfer is processed as a special early termination, not a standard early termination, so you can retain the government matching contribution and tax exemption benefits.

However, Youth Future Installment Savings is not automatically advantageous for all young people. You must consistently deposit up to the maximum of 500,000 won per month to fully enjoy the benefits, and if you do not meet the preferential interest rate conditions, the actual rate you receive may be different. Also, because the preferential type requires additional criteria such as employment at an SME, income, and household income, it is important to check first whether you qualify for the general or preferential type.

This content was produced with the assistance of AI translation services.