If you practise saving before spending, you should be able to build up your cash reserves in no time. Remember, starting as soon as you can is a good idea because time is your biggest asset. With the power of compounding, small savings can grow quickly and effortlessly over time.
Tip
Start your savings journey with our financial planning tool MyMoneySense
Adopt these money habits to manage your finances well
Invest early
Investing is a way to grow your money to reach your financial goals more quickly, than leaving your savings in a bank.
But all investments come with risks, and you could lose most or all of your investment amount. So you should invest only money you can afford to lose. This means you should first set aside cash reserves for emergencies, and have enough to pay for immediate needs, such as insurance premiums and mortgage loan repayments.
To understand and manage investment risks, there are some key fundamentals to bear in mind:
- Before you invest, have a clear idea of your risk tolerance and investment horizon. Only choose products suitable for your needs, circumstances, and investment profile.
- Invest only in what you understand.
- Maintain a diversified investment portfolio.
- Don’t get tempted and taken in by investment opportunities that appear too good to be true. The higher the returns, the higher the risks. There is no free lunch.
If you can, start investing early with small and simple investments to benefit from the power of compounding. However, watch out for fees and charges, which can affect your returns.
Tip
Fact: You don’t need a lot of money to grow your money through investing. For a start, you can buy Singapore Savings Bonds with as little as $500. More information can be found here.
You can also make just a $50 top-up to your CPF Special Account to earn risk-free interest rates of up to 5% per annum. Find out how.
Learn the 1, 2, 3s of investing.
Plan early for your retirement
Retiring well is the goal of financial planning. The earlier you start planning and committing to sound financial habits, the better your chances of attaining your desired retirement lifestyle.
To design a financial plan that will fund your lifestyle after you stop working, you first need to work out how much you need for your retirement.
Tip
The CPFB has a calculator to help you work out how much you will need in retirement, and how CPF LIFE can support you.
Don’t underestimate the effects of inflation and compounding interest. It is never too early to start financial planning for your retirement.
Financially, retiring well means:
- You have
cleared all outstanding debt and have a roof over your head.
- Consider making partial capital repayments to reduce the interest payable on your mortgage if there are no penalties in doing so.
- You have enough savings or passive income to support your desired lifestyle.
- CPF LIFE provides monthly pay-outs for life.
- There are housing monetisation options such as renting out a room and the Lease Buyback Scheme to support your needs.
- Your medical expenses are covered by insurance – national insurance schemes can support some of your needs. Review your insurance coverage regularly as your needs and premiums may change.
Tip
Let MoneySense guide you through retirement planning step by step:
Find out more about CPF LIFE
Housing monetisation options for retirees
The bottom-line is that financial planning is for everyone and the best time to start is now! Take these small positive steps towards building a more resilient financial future for yourself today.
While you’re at it, check out our Financial Health Check, a 5-minute questionnaire that will recommend ways for you to improve your financial health!
You can also register for an online seminar, where trainers from the Institute of Financial Literacy can answer your questions and guide you on your financial wellness journey.
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