It may sound abit ridiculous in talking about retirement when i have just work for 3 years and that i'm just married.
NO. It is no longer ridiculous in this century. In 1980s- 1990s, FD interest rates are higher than the inflation, BOC even offer more than 10% at one time. BUt now, do you think saving in fixed deposit will help you to have a good retirement? Of course not right?
So now talking about managing finance, how should you do?
I'm not a pro, so i share what i know. For your reference only. And.. thank my best friend who taught me the basic of finance. *hugs yan*1. Everyone should have a MSA Account.
MSA comes in many form. OCBC used to have a 2 year MSA plan with very good interest. POSB have their pretty standard one that is most suitable for Singaporeans who already have a POSB Account. Why do you need a MSA Account? To continue the other Financial Plans below, you need capital. Cutting a portion out of your salary to a separate account helps you build up a capital. If you think that you can do it without using a MSA account, i suggest you re-consider. You may have very good saving ability like saving 70% of your salary. But all these amount may be used for purchasing of house, preparation of wedding, a well-deserved holiday or even a splurge on a designer good. MSA help you cut a part of your savings for the future. When your salary is low, i suggest saving at least 10% (or better still 20%) of your Gross Income into MSA.
2. Buy insurance when you are young.
I bought my 1st insurance within few months after i work. Currently i'm looking for other good plans. I'm trying to make sure i have a satisfactory amount of coverage before i reach 30 years old. As you grow older, premium get higher. But sum insured is the same. Most of the insurance plans now have a surender value which is pretty good for us if we have plans to withdraw it at a old age. Most of such plans may require you to pay premium for 20 years, then you can continue to hold it to keep the money growing. If you start at 20+, the term will be due around 40+. If you don't surrender, and you withdraw it when you retire, it is a BIG SUM. =D
3. Do not put your eggs in one basket.
Currently, Investment & Insurance plan comes in many forms & shape. You can get from insurance company (GE, AIA, P...), Banks (POSB, UOB, OCBC, HSBC...) or even get a broker to invest for you. Personally i don't like to have all my plans in a company. You never know what will happen, when a company will folds, when a bank will declare bankrupt. Therefore, spilt your resource. Buy plans from different source. The only problem with this is that you do not have 1 portfolio to check on your total investment, but you should be able to manage your different portfolio. We may have an agent to help, but we should depend on ourselves.
4. How much is the right sum to be insured?
I do not have any dependant now. No kids, parent are financially independent. Therefore it may be abit silly for me to think sum insured, but i have plans to have kids in the future, so i have to think of them. In worse case scenario, i need to have enough money for them to survive minimally 10 years without me. Therefore, sum insured = 10 x annual household expenses. Take time to build the insurance, do not rush. As your kids start to work and are financially independent, you can start to surrender some of these insurance and get the $$ for your retirement. Therefore, do not take insurance that cannot be surrender. In another words, do not buy insurance that money can only seen after you die. This is utterly silly!
5. Get a mixture
Get Life Insurance with fixed term, get endowment for more saving, get investment plans to invest in bonds & equity. You can choose & mix what is good for you. Nowadays, there are plans that are investment + insurance, or saving + insurance etc. You may want to get pure saving or pure investment plans. All depends on your needs.
6. Study first
Apart from studying the market, also study your needs, your ability. Remember, buying financial plans is a commitment. Make sure you have ability to pay for the full term. Surrender during mid of your term will incur unnecessary loss, and in that case, you might have as well just put your money in FD. Study the market before you start, learn about forex, bonds, equity etc. Buy bonds when the economy is good, buy equity when the economy is bad. You need the neccessary info to start.
I hope the 6 points above help you get a kick-start (if you have not). And if you were to think that my dad or mum have already help me buy an insurance when i was young etc etc... oh please.. just grow up! Be in charge of your life.
*All info above is based on my understanding and research. Believe or not is up to you.
Acronyms
FD - Fixed Deposit
BOC - Bank of China
MSA - My Saving Account
GE - Great Easte
P - Prudential
