Singaporean Financial Milestones
Being one of the top financial hubs in Asia, it is surprising that Singaporeans are not in the top 3 ranking in terms of financial literacy in the region. Other than budgeting challenges and managing unsecured debt, retirement also ranks as one of the top concerns as the population moves towards a rapidly ageing society. In order to ensure a comfortable life and that we are taking a step towards our financial happiness, here’s 5 financial milestones Singaporeans should set for themselves so that they can be adequately prepared for a more secure financial future:
Set Up An Emergency Fund
Instead of living paycheck to paycheck, it is important to save up for a rainy day. We can never know when the unexpected need for cash can happen – a medical crisis that cost us tens of thousands of dollars, a retrenchment from the company or a sudden need for cash from a family member.
Most financial experts recommend that one save at least 6 months’ worth of expenses in order to tide over an emergency situation. Work towards saving up for your emergency fund as soon as you start working so that you can put that aside in a higher interest-paying account.
Adequate Insurance Coverage
Singaporeans are protected by the Medishield Life, but keep in mind that the coverage provided is a rather basic one. To ensure you get adequate coverage at a low cost, go for a term insurance policy that offers a rather no-frills insurance coverage.
As we move on to different life stages, our insurance needs change so ensure that you keep reviewing your policies regularly.
Learn to Invest
Investing is probably one of the best ways to build wealth. Saving is important, but putting your money in a savings deposit is literally eroding the value of your money as the interest earned is below inflation rate. This is where investing is important – making money work harder for you by tolerating a little bit of risk.
Before you start, it is good to read up more to understand your risk appetite, investment objectives and the type of asset class that suits you. Remember though, investment is not speculation, so it usually requires a long-term commitment and stable gains. If you are looking for big returns, you need to be able to stomach the possible loss of your investment principal.
Have A Plan For Retirement
If you are relying on your CPF for your retirement, you might be in for a shock. The minimum retirement sum from your CPF only takes into consideration a monthly payout of less than a thousand dollars. Are you sure you can live on that amount? If not, it’s never too late to start retirement planning.
You need to set aside savings for your retirement (at least 1/3 of your monthly salary), as well as split your investment portfolio into those that give you safer returns (such as bonds) and a smaller portion towards those that comes with higher risk.
Own A Home
Property ownership continues to be one of the best ways to build up your wealth asset in Singapore. The best time to buy a property is perhaps in your late twenties to thirties, where you have worked a couple of years and have built up some funds in your CPF.
However, the process of buying a property is complex and because it might be one of your biggest financial commitment in life, how you manage your mortgage has to be properly planned. Make sure you can afford the monthly repayments comfortably and always have a plan B. Also, remember that refinancing can possibly get you cheaper interest payments so stay active instead of taking up a mortgage loan and be done with it.