SG Finance Savvy

23/11/2021

[𝐏𝐚𝐫𝐭 𝟯 𝐨𝐟 𝐚 𝟑 𝐏𝐚𝐫𝐭 𝐒𝐞𝐫𝐢𝐞𝐬: 𝐏𝐫𝐞𝐩𝐚𝐫𝐢𝐧𝐠 𝐅𝐨𝐫 𝐋𝐢𝐟𝐞'𝐬 𝐌𝐢𝐥𝐞𝐬𝐭𝐨𝐧𝐞𝐬💍👩‍🎓🏠]

Part 3 is the final instalment of our Preparing Life's Milestones Series. Saving the most challenging for last, we will examine how to prepare for the three milestones: study loan, marriage and house renovation.

The reason why these three milestones are the most difficult is that they are only payable with cash. For HDB purchases and the cost of baby delivery, we can offset them with our CPF wallet.

𝗖𝘂𝗿𝗿𝗲𝗻𝘁 𝗔𝘃𝗲𝗿𝗮𝗴𝗲 𝗖𝗼𝘀𝘁:
University Tuition (4 years) - $36,000
Wedding Cost - $30,000
Renovation Cost (4-room HDB) - $44,000

T̳o̳t̳a̳l̳ ̳E̳s̳t̳i̳m̳a̳t̳e̳d̳ ̳C̳o̳s̳t̳:̳ ̳$110,000

However, tuition fees, marriage and renovation costs are all payable in cash. Some might point out that CPF O.A can offset tuition fees, and you are right! Parents can use 40% of their O.A to pay for their kid's tuition fees.

However, if we use our CPF O.A for our HDB loan of 25 years, this means that we probably have insufficient O.A funds for education. 🤔

Tuition fees, wedding cost and renovation is commonly paid for, using our parent’s savings or … a bank loan.

Believe it or not, there are bank loan options for all three milestones. But is there any way we can avoid taking a loan?

Unfortunately, building capital takes time. If we set aside just $300 a month for these goals, we would need 367 months or 31 years to set aside this sum. It is almost impossible for a young new workforce individual to have this sum of capital.

But as a parent or future parent, you can prepare for these milestones ahead. If you plan to set aside an amount every month to work towards these goals, you can consider investments or starting a savings plan!

𝐄𝐱𝐚𝐦𝐩𝐥𝐞:
Back to our example, to attain $110,000, you need to set aside $300 a month for 31 years.

But with investments (7% growth), you can attain $125,000 after 20 years by setting aside $300 a month for 15 years.

Or perhaps, investing is too risky for you, with a savings plan and more time. Setting aside $300 a month for 15 years, and after 30 years, we will attain $115,000.

Either option saves you time and money.

𝐒𝐮𝐦𝐦𝐚𝐫𝐲:

The key factor underlying all these assumptions and preparation… is TIME. When we plan for milestones earlier, they are easier to prepare for both time and money.

We hope that this series has provided some insights in preparing for you and your children's milestones, and this brings us to a close for the Preparing for Life’s Milestone Series!

22/11/2021

[𝐏𝐚𝐫𝐭 𝟮 𝐨𝐟 𝐚 𝟑 𝐏𝐚𝐫𝐭 𝐒𝐞𝐫𝐢𝐞𝐬: 𝐏𝐫𝐞𝐩𝐚𝐫𝐢𝐧𝐠 𝐅𝐨𝐫 𝐋𝐢𝐟𝐞'𝐬 𝐌𝐢𝐥𝐞𝐬𝐭𝐨𝐧𝐞𝐬]

This post is part 2 of a 3 part series. Today, we will be looking at the cost of having and delivering a baby in Singapore. Let examine them specifically before and during your delivery. 🍼🍼

1) Prenatal care
2) Cost of Delivery

Welcoming your new addition to the family is a beautiful moment and experience! The financial side of having a baby should not distract you from this life moment.

𝗣𝗿𝗲𝗻𝗮𝘁𝗮𝗹 𝗖𝗮𝗿𝗲: Refers to everything before the actual delivery. Prenatal care includes doctor visits, ultrasounds, scans and vitamins!

The average cost of prenatal care is $6,393*. But, before you freak out, do understand that this estimated cost is very comprehensive. It accounts for doctor visits, weekly fitness classes, OSCAR testing, other genetic testing and vitamins.

However, focusing on only the necessary procedures, doctor consultation, genetic tests and Oscar tests in a restructured hospital. The total can be as low as $1,500 (this amount can even be cashless!)

𝗖𝗼𝘀𝘁 𝗼𝗳 𝗗𝗲𝗹𝗶𝘃𝗲𝗿𝘆**:
The cost of delivery depends on the chosen hospital ward and the type of delivery. For simplicity, let's examine the most common options selected by Singaporeans.

A-Class ward (Vaginal) : $5,016
Private hospitals (Vaginal) : $8,456

A-Class ward (Caesarean) : $8,413
Private hospitals (Caesarean) : $12,782

The total cost of pregnancy from prenatal to delivery can put us back $6,000 to $11,000. Fortunately, this is where our Medisave Maternity Package (MMP) comes in to save the day.

For a natural delivery, we can claim up to $3,150 and $4,950 for Caesarean delivery.

The best part of the MMP lies in its flexibility to claim back your pre-delivery expenses up to $900. So do keep all of your receipts and present them to the hospital where your baby was delivered. The hospital will process the claim on your behalf.

Let's account for the necessary cost of delivering a baby, a total of $6,000. The Medisave claimable amount is $3,150. We observe that MMP helps us to offset almost 50% of the cost!

For a more detailed breakdown of the prenatal and delivery charges, follow these links to learn more

*https://dollarsandsense.sg/much-cost-deliver-baby-singapore/
**https://www.valuechampion.sg/average-cost-pregnancy-singapore

20/11/2021

[𝐏𝐚𝐫𝐭 𝟏 𝐨𝐟 𝐚 𝟑 𝐏𝐚𝐫𝐭 𝐒𝐞𝐫𝐢𝐞𝐬: 𝐏𝐫𝐞𝐩𝐚𝐫𝐢𝐧𝐠 𝐅𝐨𝐫 𝐋𝐢𝐟𝐞'𝐬 𝐌𝐢𝐥𝐞𝐬𝐭𝐨𝐧𝐞𝐬]

We can break down the five different milestones into their relevant wallet expenditure. The three wallets that are relevant to our discussion: 🤔

1) CPF Ordinary Account
2) Medisave
3) Cash

This is part 1 of a 3 part series. In this part, will be discussing the CPF O.A usage for… our property purchase. Be it HDB BTO or resale flat, most of us will look towards using CPF O.A.

After selecting our HDB unit, here comes the first concern: Obtaining an HDB loan. Most Singaporeans will take up HDB Loan via HDB Loan Eligibility (HLE) letter to utilize their CPF O.A instead of cash for funding their property purchase.

Now, this raises our next concern, down payment for an HDB loan. With an HDB loan, we have to put forth 10% of the purchase price.
If we cannot fulfil the 10% downpayment via CPF, the difference must be paid in cash.

The remaining 90% will be an HDB loan, charged at an interest rate of 2.6% over the next 25 years of the repayment period. The HDB loan repayment will take place as a monthly CPF O.A deduction.

Congratulations! Now, you and your soulmate may return to your romance and dates while our hardworking labourers construct your future home 🏠

19/11/2021

[A Typical Singaporean Journey]

An excellent highlight and summary of life's milestones.

Keep a lookout here for a 3 part series on how we get ready for them!

Due to the high cost of living in Singapore, life is constantly about planning ahead and working toward certain milestones, such as buying your first home, getting married and starting your own family. Here's how much these milestones can cost!

16/06/2021

[Just How Much Have Prices Increased In Singapore Over The Past 20 Years?]

Even though Singapore's average inflation rate is about 1.6% from 2000 to 2030. Not everything in Singapore increases at the same rate.

But what are some of the biggest increases over the past two decades?

28/04/2021

[Are Investments Safe Or Risky?]

This question is one of the first questions we consider when we begin our investing journey. We always hear people making amazing returns or devastating losses for their investments. Also, a common strategy we always hear- “Buy Low & Sell High”

The “Buy Low & Sell High” strategy and the stories of amazing highs and devasting lows, are all at the mercy of the stock market. In the short term, market movements are unpredictable and a short-term loss is likely. However, the most important fundamental of investing in the stock market will always be positive in the long run!

We can see that the longer we are invested, the chances of losing our investments are significantly low. This is why banks can provide us with a capital guarantee from the 15th year onwards, with some degree of returns.

More Information: https://darrowwealthmanagement.com/blog/should-i-invest-when-the-market-is-high-dispelling-the-buy-low-sell-high-myth/

03/01/2021

[Understanding Our Straits Times Index]
________________

The Straits Times Index (STI) has just enjoyed an absurd recovery since November 2020 and has generated quite some hype as a result. However, jumping into the bandwagon without a good understanding is the last thing you want to do. So what is the STI index?

The Straits Times Index (STI) is a market capitalisation weighted index that tracks the performance of the top 30 companies listed on SGX. Singaporeans are very split towards STI. We are either strong proponents or dissidents of them. Let us briefly weigh both sides of the spectrum.
________________

Pros of investing STI:

1) You can avoid foreign exchange risk by investing in local companies

2) It is important to understand what your investments! As Singaporeans, we have a far easier time understanding the companies and the local economic climate

3) Many local banks( E.g OCBC and DBS) offer platforms to invest in STI ETFs, making it easier for Singaporeans to start investing.

4) Dividends! STI ETFs pays an average dividend of 3-4% per year, this is excellent for investors looking for dividends.
________________

Cons of investing STI:

1)The STI is heavily reliant on the performance of our 3 local banks ( UOB, OCBC and DBS), especially since their weightage makes up 35% of the STI. This contradicts the purpose of investing in an index fund, which is to achieve diversification by investing across many companies and industries.

2)The STI’s growth is for the past 10 years (2010-2020) has been very noticeable volatility and lacks overall growth. The STI valuation in Jan 2010 compared to today, is only $100 difference see “Graph of STI Index”

________________

Investing in STI ETFs heavily boils down to your investing preference and strategy. If you are seeking for dividend payouts, STI ETFs would be a good consideration.

However, if you are seeking for passive investments for growth, STI ETFs would not be a strong contender for your investments!

Graph Of STI: https://tradingeconomics.com/singapore/stock-market

24/09/2020

[How Much Does CPF LIFE Payout Cover My Lifestyle]

Every month, we put aside some of our salary towards our CPF to help prepare for our retirement. Our CPF system is rated AAA by Moody’s, indicating that CPF is very reliable and safe.

CPF Special Account provides us with a 4% p.a guaranteed return! However, the main drawback is the long wait. We must wait until our drawdown age of 65 before we can begin receiving it. It’s great to know that the government has us covered, providing us with a platform to helps us grow our retirement nest before we reach our golden years. But, how much thought have we given ourselves to understand the extent of the providence of the FRS amount?

Let’s consider two significant cost of our day to day activities- transport and food. From our calculations (as shown in the pictures) a comfortable retired lifestyle would cost us 1.4k a month. The standard plan's payout plan for out CPF FRS amount is also 1.4k a month. This is great! Our CPF LIFE covers our basic expenditure for the rest of our life!

However, if we are looking to travel regularly or indulge in more luxury, CPF LIFE is not able to sustain a fancier lifestyle. We hope this helps to clarify the extent CPF LIFE provide us in our golden years. If we want to travel and enjoy a more comfortable lifestyle, we must begin our investment and savings plans to meet the additional expenses!

16/09/2020

[Capital Guaranteed Products In Singapore]

As Singaporeans, we pride ourselves in being efficient, achieving multiple goals with a single course of action. This is how we maintained our competitive edge without natural resources. Similarly, we wish that our money is as hardworking and as efficient as us.

Instead of leaving our money to grow at 0.05% in our savings account, there are opportunities to provide us slow but steady growth, just like the fable of the tortoise and the hare. The tortoise represents investments in the form of fixed income and bonds. The hare represents stocks, that can grow faster but is susceptible to volatility and losses.

DollarAndSense has summarised the different capital guaranteed platforms and their respective yield. In general, the longer you can commit to the investment, the higher your return.

CPF S.A (Special Account) provides you with an excellent platform to grow your account at 4%! You can grow your wealth by transferring your CPF O.A (Ordinary Account) into your S.A account! However, the transfer is irreversible. So, if you require CPF O.A for your house or your child’s education, it might not be wise to transfer everything into your CPF S.A.A savings plan can be a great option if you are seeking to grow your wealth while taking some risk to increase your return!

Links:
https://dollarsandsense.sg/6-investments-singapore-provide-guaranteed-principal-returns/?fbclid=IwAR2buSWy9CT18U9w-ObHHzM8T5dRQHmr6k58kaLoFNQiWfVVSceGnETM3is

06/09/2020

[When Do We Use An Investment Plan vs Savings Plan]

In Singapore, we like being efficient, covering as much ground as possible with a single course of action. This is true for our perspective towards finances as well, we want our wealth to be growing efficiently! We recognise that the 0.05% interest rate from our savings account is insufficient and inefficient.

A common dilemma is choosing between a Savings Plan or an Investment Plan. An investment plan provides us with a higher return, but a savings plan provides us with better peace of mind. The key decision rests heavily on whether you require a lump-sum at a specific point of time(For instance, marriage banquet or house downpayment).

A common argument for an investment plan is its higher return and upwards growth trend in the long-run. However, it is impossible to predict the value of your investments at a specific point in time! For example, if you require a large lump-sum for your house downpayment and your investments are doing poorly, you might no choice but to liquidate your position at an unfavourable time. Therefore, a savings plan is preferable to provide a higher level of stability and growth.

On the other hand, if your goal is growing your wealth over the long-run without any specific goals, an investment plan might be a better choice for you! The investment market has proven itself to have an upward trend over the long run recovering stronger from recessions as part of the economic cycle.

05/09/2020

[CPF S.A Shielding - Optimise Your CPF]

Seedly has shared an ingenious way to optimise your CPF accounts before we reach age 55! Age 55 is a major milestone in our CPF journey. CPF creates a new account for us, our Retirement Account(R.A) that grows at 4% p.a guaranteed!

However, the main limitation with R.A is it’s priority in drawing from our Special Account first. Why is this an issue? This boils down to the interest rate provided by CPF Ordinary Account (O.A) and CPF Special Account (S.A). Our CPF O.A account grows at 2.5%,but our CPF S.A account grows at 4%!

The CPF “Hack” creates a bubble for your S.A, forcing your Retirement Account to drain from the CPF O.A first. This is achieved by investing your CPF S.A into very safe investments before your 55th birthday. Then you will liquidate it after the creation of your CPF R.A account to continue enjoying the guaranteed 4% growth!
The difference is surprisingly very drastic! We took the liberty to carry out some calculations (See below). The 1.5% difference over 10 years can be a 24.5k difference just with some simple but shrewd procedures.

You can read more about the CPF S.A Shielding from Seedly’s website:
https://blog.seedly.sg/cpf-special-account-sa-hack-retirement-planning/

14/06/2020

[Unit Trust vs Investment-Linked Products vs Fund Management Accounts. CPF - Part 6]

If you looked at the list of investment vehicles approved by the CPF board, you might be overwhelmed with the sheer number of options and difference between them. Some of them, are less known and understood.

Today, we will be understanding three very similar options:
1) Unit Trust
2) Fund Management Accounts
3) Investment-Linked Products (ILPs)

A unit trust comprises of different stocks or bonds and is actively managed by a fund manager. We can breakdown a unit trust into what and where they invest in. For example, an Emerging Market stock fund might hold more stocks in Vietnam. A European Bond Fund might have more bonds in Europe in its portfolio. Each of these funds has a risk level corresponding to its underlying assets.

Fund management accounts are your asset management companies or investment administrators that oversee your unit trusts. Examples of fund management companies are Blackrock and Aberdeen. Why CPF created a separate category for fund management account is beyond us since it is technically not a different investment vehicle. Perhaps it aims to provide us with more exposure to different asset management companies in Singapore.

Investment-Linked Products (ILP) is essentially a unit trust with a protection element to it. For example, your ILP may have a death benefit 110% of the total premiums paid. Or. you can add a premium waiver benefit rider; in the event of critical illness or death, your future premiums will be covered by the insurance company. A question that many of us will have... if I am only looking at investments, why don't I invest in the unit trust directly instead of going through an insurance company? Some insurance companies provide bonuses that boost the overall return given the same capital and investments.

Moneysmart.sg has created an excellent and simple summary regarding the utilisation of your CPFIS OA/ SA for investments (illustrated below). If your investment vehicle utilises CPFIS-OA you need to set up an investment account with local banks. On the other hand, CPFIS-SA does not require the setup of an additional investment account.

CPF Investment Scheme:
https://www.cpf.gov.sg/Assets/members/Documents/CPFISInvestmentProducts.pdf

Fund Management Account:
https://blog.moneysmart.sg/invest/cpf-investment-scheme-cpfis/