Making financial plans in your twenties may not have the same sense of urgency and great anticipation as it does in your thirties and forties. However, having personal finance skills are necessary to live the life you wish in Singapore. Whether you are taking a trip abroad, making a marriage proposal, or buying a house, achieving all these significant life events necessitates careful financial planning and management.
Starting your personal financial planning early will allow you to take advantage of every opportunity that life has to offer. Here are the six significant milestones to look forward to between graduation and retirement, and what you can do to prepare financially for each of these events.
Getting Your First Job
Getting your first job after graduation is indeed an accomplishment to be proud of! You are just in the right direction to start an exciting life. However, as much as you can, you must resist the urge to spend all of your money right away, and take a moment to think about what you want to accomplish in the next few years.
Having a job is only the beginning of a path toward financial stability. You must begin to save and manage your money in order to maximize your earnings. The foundations of a financially secure and stable future can still be built even if your initial salary is lower than you expected. Experiencing a pandemic has also taught us that we must be ready for whatever life may throw at us and that we must always plan ahead.
Let your money grow as you work hard at your job (don’t let inflation catch up)! Maximize your savings with a Savings Account and you’ll be well on your way to financial success from day one.
Here are a few things you should do right away:
Get a head start on retirement planning
The day you receive your first paycheck is the ideal time to begin saving for your golden years. It is normal to experience a thrill of independence and the opportunities this increased purchasing power offers you. It’s understandable if making a financial plan isn’t at the top of your priority list yet. But that doesn’t lessen its significance for your future.
When you’re in your twenties, time is one of the most important assets you’ll ever have. If you start saving for retirement now, rather than wait until your 30s or 40s, you’ll be able to accumulate a quite significant amount of nest egg. It’s a smart idea to start saving for the future using one of the CPF’s investment plans. In this way, you have 40 years to optimize the power of compound interest and earn significant rewards when you place your savings in an account that invests or generates interest. The sooner you start investing for your retirement, the more opportunities you’ll eventually reap.
While your CPF Ordinary Account (OA) savings will contribute to your retirement, you may wish to use a portion of these funds to purchase your first apartment/hbd flat. It is important to remember that the more you spend on a home, the less money you’ll have for your golden years. It is therefore essential to supplement your CPF Savings through a separate retirement account so that you’ll have adequate money for both a flat and your retirement years.
Set your goals and get protected
Now that your retirement plans are in place, it’s time to consider your goals for the following two to five years. Do you see yourself in a few months traveling the world? Are you considering building your own company? Or take up another course? You may wish to start putting aside a percentage of your earnings to help you achieve these aspirations. The younger you start saving, the less financial burden you have since your obligations are lesser.
There are savings plans that can help you create the habit of saving for short-term to long-term goals. For example, the Income’s Gro CAsh Flex and Great Eastern Life’s Great Flexi Goal which allows you to choose your coverage and premium term to fit your budget. Gro Cash Flex, on the other hand, begins paying out cash payouts at the end of the second policy year. Cash distributions can also be accumulated with us to earn interest at a rate of up to 3.25 percent p.a. if you like.
Purchasing your first home
Buying property in Singapore, whether it’s a HDB flat or a private condo, is the biggest purchase you’ll ever make. You may purchase a build-to-order flat (BTO) with your spouse, a private property, or a resale HDB flat if you are part of a family nucleus at the age of 21. On the other hand, if you’re planning to buy a HDB resale flat, you must be at least 35 years old. In any case, you may select when to begin this new phase of your life with the correct information and preparedness.
Depending on the type of property and location, prices for flats might vary widely. If you’re interested in a particular estate, you may research the latest pricing to get an idea of how much the kind of estate you prefer costs. Using this information, you can figure out what kind of flat you can afford and how much money you need to start saving for it now.
Choose a flat that is within your financial means
Generally speaking, you should not spend more than 30% of your monthly gross income on housing. Payments for utilities, upkeep, taxes, and insurance are all included in this total.
Even if you’re able to afford a mortgage, remember that you’ll still need to save for a down payment, so this is a lot of money. The additional expenses that come along with owning a home can easily add up to several hundred dollars to your monthly budget.
When it comes to figuring out how much you can spend, the 30 percent rule is just a general guideline. Always keep in mind that certain things don’t follow the rules. It’s possible that your housing budget will be smaller than someone who doesn’t owe any student loans.
Make adjustments to this percentage based on your lifestyle and financial circumstances.
Set aside money for a down payment right away.
Begin saving for your flat’s down payment as soon as you decide to buy a home of your own. The size of your down payment is determined by the type of property you intend to purchase and the source of your financing.
In order to acquire a HDB flat with a HDB loan, you must pay a 10% down payment, which can be paid in cash, through housing assistance, or using savings in your CPF OA account. There is a 25 percent down payment required for bank loans, on the other hand. CPF OA funds or housing assistance can be used to support 20% of the down payment, but you must pay the remaining 5% in cash.
Considering that your CPF funds are intended for your retirement, thus you can choose to pay the flat’s down payment in cash rather than using CPF savings.
An insurance savings strategy like Income’s Gro Power Saver or Great Eastern Life’s Great Wealth Multiplier II makes saving for a down payment and other financial objectives more convenient. For the Gro Power Saver, only the first three policy years of this 10-year plan require you to pay premiums. After seven years of paying premiums, you can begin saving for something else. Great Wealth Multiplier II can allow you to multiply your savings with multiplied returns of up to seven times or more.
Getting married
You may have found the person of your dreams who has all the qualities you’re looking for in a spouse. But before you say yes, you might want to ask yourself first if you can afford an engagement ring, the cost of a wedding, and a married life.
A dinner date for one in Singapore costs even more than to legally get married in Singapore. If both of you are Singaporean citizens or Permanent Residents, you can get married for just $42 at the Registry of Marriage (ROM). If you prefer a more solemn kind of wedding, you may also have your ceremony be held at a church, hotel, or other site outside the ROM. However, this might cost you hundreds of dollars, depending on where you reside.
Getting married in Singapore can cost anything from $30,000 to $100,000, according to The Wedding Vow. It all depends on where the dinner is held, who photographs the wedding, and how elaborate your rings, outfits and decor are. The fees vary greatly. Despite current constraints that limit the size of your wedding celebration, you may wish to plan ahead for when the situation normalizes and the restrictions are lifted.
You and your fiance should take the time to figure out what’s vital to include in the wedding and how much money you can afford to spend. You might find some helpful subsidies like wedding angbaos but that would not be enough. It’s important to be mindful of extra costs as you begin your new life together!
Once you’ve found a place to live, begin saving for your wedding.
Having a plan in place for where you’ll live after the wedding is essential. BTO applications can be started under the “Fiancé/Fiancée” Scheme at this time. There is enough time to save for your wedding and get married before BTO flats are developed, which allows you ample time to do so.
Once you’ve settled into your new home, begin saving a portion of your monthly income for your wedding.
Having a baby
A few years into your marriage, you and your spouse may begin to consider having children. Or perhaps you’ve just found out you’re expecting your first child and are counting down the days before its arrival.
Once the baby comes out, it can be tough to keep up with all of one’s daily responsibilities. There doesn’t appear to be a standard set of guidelines for raising children; everyone from well-known authors to doctors to family members and friends appears to have an opinion.
Don’t forget to plan for your first child’s financial future before you get too overwhelmed with OB-GYN and prenatal vitamin advice.
Bringing a child into your home is a significant financial and time commitment that forces you to reevaluate your life goals. Early planning will make it easier for you to provide your firstborn the best that you have to offer.
First and foremost, consider the costs of pregnancy and childbirth. Financial planning for your child’s early years will be easier once you have this figured out.
Savings for childbirth and maternity care
Pregnancy-related expenses include everything from prenatal visits for you or your partner through postpartum care. How much you pay for medical appointments depends on which hospital/center you choose.
One method to save money is through purchasing antenatal packages that cover all of your prenatal gynecological doctor expenses during your pregnancy. Both public and private hospitals in Singapore offer these for up to $800 but only eligible for Singaporean Citizens and Permanent Residents (PR). If you acquire it in a private hospital, expect it to be more expensive.
You should keep in mind that antenatal packages only cover consultation expenses and may not include other services, such as specialized tests. Pregnancy difficulties may necessitate the need for additional financial resources so it’s important to plan ahead of time for unexpected expenses that may arise.
The best option to subsidize your medical expenses is through taking advantage of Medisave Maternity. This gives you an opportunity to take out up to $900 for pre-delivery medical costs.
How much should we prepare for childcare costs?
The majority of a pregnancy’s maternity expenses will be incurred during the delivery process. The cost of a delivery package in Singapore varies, just like with the antenatal package, which depends on the hospital and type of ward. A two-day stay in a government hospital’s Class A ward will cost you at least $5,674. If you want to go to a private hospital, it’s wise to shop around and compare prices so you can figure out which is the most cost-effective option for you.
The Medisave Maternity Package might help you save money on delivery fees. Between $750 and $2,150 can be withdrawn for delivery costs depending on the process. During the delivery, you can additionally take out $450 for each day of hospitalization that you spend.
Get maternity insurance to enjoy a financially secure pregnancy
It’s rare for pregnancy problems and congenital diseases to occur. Even so, if they don’t, you or your child may have to spend more time in the hospital or receive more expensive medical care. You can get protected and eliminate the financial risks by signing up for some of the maternity plans available such as Income’s Maternity 360 or Great Eastern Life’s Great Maternity Care.
Maternity 360 can give significant financial protection in the event of pregnancy difficulties or the diagnosis of a congenital illness from the 13th week of pregnancy onwards. Even if your infant needs phototherapy treatment due to severe newborn jaundice, Maternity 360 provides daily hospital care benefits and a cash reward.
Great Maternity care offers a complete coverage for both mother and child against any pregnancy and childbirth complications. Your child will be covered against 26 congenital conditions from birth.You can receive up to $200 daily hospital cash payout up to 30 days due to a covered hospitalization event.
With life insurance, you may ensure the financial security of your family.
For the next 25 years, your child will rely on you. You or your spouse should seek life insurance coverage as soon as you decide to have children or learn that you are pregnant.
So many things can go wrong in our lives, and we can’t guarantee that we’ll always be able to care for our children. These are the situations in which life insurance can be quite beneficial. If you die or become permanently disabled, life insurance provides your family with the money they need to maintain their standard of living.
Having a life insurance plan Income’s Star Secure life insurance plan or Great Eastern Life’s Great Life Advantage in the event of a terminal illness, death, or total and permanent disability, can provide up to 500 % of the sum assured. It is possible to add riders who will be covered against future unknown diseases, such as the COVID-19 that was just discovered. Your young family will have the financial security they need in the face of an uncertain future thanks to these comprehensive features.
Children's Education and Childcare
Once the expenditures of pregnancy and delivery have been covered, it’s time to start thinking about the costs of raising a child. Before deciding on your or your wife’s maternity leave, be sure you’ve thought on the best childcare choice for you and your family. Investing in your child’s college fund is the next most important thing you can do as a parent.
Decide on the best childcare option for your family
Think about what daycare choices are available to you and your family before returning to work. Flexible work arrangements and hiring a babysitter are just two examples of the wide number of childcare options available. Depending on your childcare options, you may pay as little as $50 a month or as much as $2,000 a month.
Increasing your child’s contact with individuals outside your family, regardless of the type of childcare you choose, increases the risk of your child contracting infections like Hand, Foot, and Mouth Disease (HFMD) (HFMD). This is why it’s so critical to set up the appropriate insurance coverage ahead of time. HFMD is one of seven infectious diseases covered by personal accident insurance plans like PA Secure and Great Junior Protector Plans. You can also get reimbursement for child care costs if your child is hospitalized or on certified medical leave as a result of an injury or an infectious disease as an optional benefit.
Set up a college fund for your child
The good news is that tuition for locals and Singaporean PRs is relatively reasonable in Singapore. This is more applicable for elementary or secondary school. Extracurricular activities, such as sports and music, will likely cost more, as would tuition if your child requires it.
On the other hand, university tuition is increasing each year. It costs between S$29,350 and S$38,450 to attend the National University of Singapore (NUS). At least $17,000 a year is expected even with the MOE Tuition Grant Subsidy. The cost of sending your child to study abroad is much higher. At least $33,000 per year is required to attend a university in Australia or the UK, which does not include living expenses or other fees. If you have to choose between investing for your own retirement and providing for your children’s education, it might be a difficult choice. However, if you start planning early, you can lessen the burden on your child at such an important time in their lives. Regardless of your decision, you’ll be glad you planned ahead of time.
Don’t put off starting your child’s education fund until they’re old enough to go to school. Compounding interest gives you extra time to attain your goal if you start saving early and consistently.
Save for your child’s future with a flexible savings plan that suits your needs.
Creating a budget for your future
You might have probably undoubtedly figured out that starting your retirement savings in your 20s is a good idea. There has been a shift in the importance of retirement planning in the last few years, as new ambitions and short-term financial demands have taken precedence.
As time goes on, you’ll learn to appreciate the importance of reprioritizing your retirement funds. Many working Singaporeans between the ages of 35 and 55 consider themselves to be a part of the “sandwich generation,” a group that is burdened with both raising a family and caring for aging parents financially.
Family members affected with the sandwich generation become unable to top up their retirement funds because of these double obligations. Young Singaporeans today may find themselves in a similar predicament in the future, responsible for both the elderly and those who are just starting out in life.
Begin saving for retirement as soon as possible, even if you’re in your twenties. You relieve your offspring of the financial burden of caring for you in your old age if you have the wherewithal to do so. A further benefit of beginning your retirement planning early is that you have time for your savings to increase as you hit other life milestones.
How much money do you need to be able to retire comfortably?
The formal retirement age in Singapore is 63, and your employer must be able to provide you re-employment if you wish to continue working for them until the age of 68. This means that you can expect to work full-time until the age of 63.
Now, have a look at the average life expectancy in Singapore. Singstat estimates that women will live to be 86 years old, while men will live to be 819 years old. Keep in mind that your health will begin to deteriorate about the age of 73, and you may require specialized care or medical operations at that time.
Savings for 25 years of spending is a good starting point for figuring out how much money you’ll need when you retire. If you plan to retire in your own home and have paid off your mortgage, you may be able to get by on $1,200 a month. If you plan to travel or start your own business in your senior years, you’ll probably need extra money.
You can use Retirement Calculator to figure out how much money you’ll need for your golden years depending on your estimated monthly expenditures. Use it to see how much you need to start saving each month, and it’s incredibly simple to use. Professional guidance can be personalized if desired.
Your retirement funds should be boosted now
To assess if you’re on schedule to fulfill your retirement goals, take a look at the amount of money you’ve saved. If you acquired a plan when you first started working, you should have a sizable nest egg by the time you’re in your 40s.
Even if you didn’t start saving for retirement until later in life or you’re already behind your endeavors, your forties are an ideal opportunity to make up lost ground. You’re in your prime earning years, yet you’re still two decades away from retirement. You can still achieve your goals if you increase the amount of money you save.
To help you reach your retirement goals, see what else you can put in your retirement portfolio. You can either perform your own research or seek the assistance of a financial planner. Consider the following points.
Life expectancy of the CPF
The low-risk annuity program CPF LIFE provides a monthly payout for as long as you live if you haven’t already done so. If you survive to your mid-80s and beyond, you won’t have to worry about running out of CPF money.
Despite the fact that you will receive regular payments for the rest of your life, you may not be able to cover all of your retirement expenses. CPF LIFE works best as part of a comprehensive retirement planning strategy.
Look at the CPF LIFE payouts you’ll receive and compare them to the monthly expenses you expect to incur in retirement to get a sense of how much additional money is needed.
Supplementary Retirement Scheme (SRS)
SRS can be used in addition to your CPF savings to increase your retirement savings. Simply register an SRS account with DBS, UOB, or OCBC and deposit up to $15,300 per year. Investments like Singapore Savings Bonds, investment-linked plans, unit trusts, and even blue chip stocks and index funds can be made using money in your SRS account.
No matter how much money you put aside for your SRS, make sure you won’t miss it once you stop working. If you take the money out before the age of 63, you’ll have to pay a hefty 5 percent penalty.
What are your long-term goals?
Financial planning can be a tedious and difficult task, but preparing a vacation or a wedding can be far more exciting and glamorous. In spite of the fact that it’s fine to desire these things, it’s only by wise money management that you may achieve the lifestyle you wish. You may make these ambitions a reality with appropriate financial preparation.
There’s a good chance your personal milestones will differ from those listed here. You could wish to create a non-profit or retire earlier than the usual. If you have any plans for your life, write them down, along with the resources you will need to carry them out. You’ll be able to plan your next step if you know what you require. Our knowledgeable financial consultants are available to answer any questions you may have about making the most of your income to achieve your financial objectives.