[Practical Finance] Don't Underestimate 'Cheongnyeon Geumyung' and Check Carefully

'Youth Long-term Asset Account' Scheduled for Launch Next Year
Financial Products Allowing Savings of Tens of Millions Based on Income
Policy Products Also Carry Risks, Careful Evaluation Needed

Application screen at the launch of the Youth Hope Savings. [Image source=Yonhap News]

[Asia Economy Reporter Song Seung-seop] Policy financial products targeting youth are gaining attention. They offer greater benefits than private bank financial products, and the new government has promised to provide young people with opportunities to build assets. However, experts advise careful examination as there may be disadvantages depending on conditions and circumstances.

According to political and financial circles on the 12th, a "Youth Long-term Asset Account (tentative name)" is expected to be launched next year. This policy financial product is a more concrete version of a pledge made by President Yoon Seok-ryeol during his candidacy, formulated by the Presidential Transition Committee. The main idea is that citizens aged 19 to 34 who deposit a certain amount for 10 years will receive government support to accumulate a total asset of 100 million KRW. However, specific interest rates and whether there will be differentiation based on assets and income have not yet been decided.

The new government is also reportedly considering a "50-year maturity mortgage loan." This can ease loan regulations without relaxing the Debt Service Ratio (DSR) rules. Recently, 40-year maturity products have been introduced in the market and have received favorable responses from consumers. Although the total principal and interest to be paid increases, the monthly payment decreases. This especially makes it easier for low-income youth and newlyweds to own a home.

Currently available youth policy financial products include the Youth Tomorrow Savings Account. It targets working low-income youth (aged 19 to 34) and allows them to accumulate up to 14.4 million KRW in lump sum savings. If the individual saves 100,000 KRW monthly, the government supports with earned income incentives ranging from 100,000 to 300,000 KRW. However, the applicant must have an income between 50% and 100% of the median income and an annual income of 6 million to 24 million KRW or less.

There are also housing-related financial support products. The Youth Preferential Subscription Savings Account offers higher interest rates for up to 10 years compared to general housing subscription savings. The rates are 2.5% annually for 1 month to 1 year, 3.0% for 1 to 2 years, and 3.3% for 2 to 10 years. These are each 1.5 percentage points higher than general housing subscription savings. If the subscription period exceeds 2 years, a tax exemption benefit of 5 million KRW is provided. Income deduction is available up to 2.4 million KRW annually, covering up to 40% of total contributions. From this year, the income eligibility criteria have been relaxed from 30 million KRW to 36 million KRW annually.

The Tomorrow Start Account is a type of installment savings account provided to beneficiaries or near-poverty groups who actively participate in self-support work projects. Depending on the monthly savings amount (50,000 KRW, 100,000 KRW, or 200,000 KRW), the government provides support funds, Tomorrow Start incentives, and Tomorrow Start earnings (up to 150,000 KRW). Assuming a monthly saving of 200,000 KRW, one can accumulate up to 23.4 million KRW over 3 years.

For those seeking financial support for jeonse (key money deposit) or monthly rent, there are youth-exclusive support funds: the Youth Exclusive Buttress Jeonse Fund and the Youth Exclusive Guaranteed Monthly Rent Loan. The Youth Exclusive Buttress Jeonse Fund offers low-interest loans to young people lacking jeonse funds. It lends up to 70% of the rental deposit, and up to 80% for newlyweds, multi-child, or two-child households. The maximum loan limit is 120 million KRW in the metropolitan area and 80 million KRW in other regions.

The Youth Exclusive Guaranteed Monthly Rent Loan supports both deposit and monthly rent at low interest rates in the 1% range. The deposit can be borrowed up to 35 million KRW at an interest rate of 1.3%, and monthly rent up to 500,000 KRW (cumulative 12 million KRW) at an interest rate between 0% and 1.0%.

However, policy financial products also carry risks. Although the benefits seem attractive, they vary by product and may change depending on policies. For example, the Youth Long-term Asset Account has a maturity five times longer than the Youth Hope Savings Account launched last February. While the accumulated amount grows larger, young adults who need urgent funds may face disadvantages due to high early withdrawal rates. Therefore, it is advised to avoid blindly subscribing to policy financial products at the maximum limit and to carefully review the product conditions along with current income and financial status.

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