I only recently made my first steps into taking up an investment product – setting aside an eyewatering S$20,000 for two years in a calculated effort to kick-start my investing portfolio and strengthen my savings for the future.
So, if you’re like me and find yourself ready to make your money work harder, read the first part of Grow Me the Money here to catch up on some key investment terms.
While you build your knowledge about investing and continually strive to achieve your version of financial freedom, you might be wondering – exactly what should we invest in? Depending on your life stage, you’ll have a unique set of priorities when it comes to attaining your saving goals or working towards your retirement dreams.
I spoke to Carolina Wong, Financial Services Director of Singlife Financial Advisers for crucial advice on taking that first step into the world of investing, no matter which stage of life you’re at.
Protection first
Before you leap into pulling up your bank records for a financial review and talking about that dream retirement, Carolina believes you must set the foundation right with adequate medical protection.
“If you don’t have comprehensive protection, any amount of wealth you’ve built will be wiped out by unexpected medical expenses – which are quite high with current standards of living,” Carolina says.
“The basic but most important forms of coverage are hospitalisation, total and permanent disability, long-term care and critical illness (CI) plans as early as possible.”
To learn more about your healthcare insurance options in Singapore and how you can safeguard yourself against unexpected medical bills, read our article here.
Your life stage determines your investment approach
There are generally four life stages, each with their associated risk appetites and financial goals. This means your investments will shift accordingly, to ensure you’re not only able to invest but can continue doing so with minimal impact on your spending or saving needs.
Let’s dive into these main life stages with Carolina and look at some products you can consider to better shape your financial future.
In your 20s - The greenhorn
You’re new to the workforce and just starting to build your savings, so investing might not be a priority. If you’re just starting to save, earn and budget, this is a crucial time to establish a strong baseline so it’s good to solidify healthy budget habits first, i.e., setting aside a fraction of your income regularly, whether for personal savings or to begin your foray into investing - the challenge is sticking to a routine so your investing portfolio can get a head start!
You might need a little help when it comes to planning pragmatic financial goals, especially when it might be challenging to set money aside, let alone think about investing.
Tips from Carolina
If you’re just starting your investment journey, hitting your financial targets can be both a confidence and savings booster for your future. With Singlife Steadypay Saver, you can kick-start disciplined saving habits and stay motivated with yearly cash coupons from the end of your 24th month of commitment.
In your 30s - Full speed ahead
You’ve been working for some years now, so your savings are (hopefully) more solidified. You have also set aside a healthy sum of cash as your emergency fund (at least 3 to 6 months' worth of expenses) This might be the age where you’re planning to hit more exciting milestones like marriage, starting a family or buying a home. With these goals, your financial obligations might increase so you might be considering other investment products without being too adventurous.
Your family circumstances will greatly affect your investment strategy. For instance, if you're in your 30s and have kids or are planning to have them, your focus may be on accumulating savings and ensuring adequate protection. However, investing for the long term during these years could help you take those baby steps to achieving your financial goals. On the other hand, if you and your partner don't plan to have kids, you may have started thinking about retirement planning or paying off your mortgage earlier. In this case, you can afford to set aside more for investment and may not need as much liquidity.
“I believe this group has higher earning power,” Carolina says. “They’re more disciplined and may not need so much liquidity. They most likely have a sum of savings from their employment but may need a boost to manage the increased standard of living i.e. inflation and higher cost of living.”
Tips from Carolina
Now is the time to diversify how you invest. Singlife Choice Saver allows you to customise your plan’s maturity at desired ages for different purposes such as education funds, family planning, renovation or property upgrades. If you'd like to choose your funds and invest based on your risk appetite, products such as the Singlife Savvy Invest II allows you this flexibility.
In your 40s - Slowing down
You’re still in the workforce but touching an age where your dependents are more mature. Maybe your kids are finishing their education or about to leave the nest. You might even be looking to pay off big-ticket items and still be caring for aged parents, all while entertaining ideas of what retirement means to you.
Depending on whether you're in your early or late 40s, some of your considerations may include upgrading your home, growing your family and supporting your parents in their old age. A good strategy for you now would be to prepare for retirement while managing potential risks and liquidity needs like paying for your kid's university tuition fees. Remember, your savings combined with a solid retirement plan should be able to continue supporting your desired lifestyle even during retirement by providing yearly passive income. At this stage in life your strategy shifts towards lowering the risk of your investment portfolio in order to maintain a regular income stream.
Your investment plans and accumulated returns should start catering towards the funds needed for retirement. As you consider kicking back, your financial plans might serve not just you but your loved ones as well. After all, no one wants their family to be laden with bills or debts should anything unexpected happen to them.
“A retirement fund should comprise of three parts – Guaranteed, Variable and Bonus – the first two, I always tell my clients I can assist with building, but the third is not within my means as this refers to literal bonuses such as inheritance or striking the lotto!” Carolina quips. “That said, there are products which can help with guaranteed and variable funds.”
Tips from Carolina
For the Guaranteed components of a retirement fund, you may consider Singlife Flexi Life Income II, which offers a yearly cash payout for life and features a capital guarantee so you’ll not lose the money you’ve put in should you surrender the policy after a period. It also gives you the flexibility to choose the payment or accumulation period to suit your needs. For Variable funds, Carolina recommends investment products which issue dividends periodically, which you can choose to reinvest as you wish.
Note:
A dividend is the distribution of a company's earnings to shareholders which could be paid out in cash or through reinvestment in additional stock.
In your 50s - Kicking back
You’re ready to leave the 9 to 5 life and enjoy your golden years! Life may have started slowing down for you as you reap the rewards of your hard work, and this milestone could turn out to be the most exciting as you prepare for retirement.
Ideally, you’re free from loans or heavy financial obligations upon retirement. With your kids being financially independent, with their own jobs and homes perhaps you’re looking to downsize – whether it’s a smaller home or reviewing accumulated assets, this might be when you’re expecting your investments to start paying off.
Remember, your savings combined with a solid retirement plan should be able to continue supporting you by providing passive income. Protection is still crucial, so your investments should not only fund you at this stage but safeguard you and your loved ones too.
Tips from Carolina
Singlife Flexi Life Income II might suit this more risk-averse group, which provides a steady flow of income for life to ease any unexpected financial burdens.
Let’s grow you the money 💰
As you embark on your journey to achieve financial freedom, it’s important to be intentional and plan for it. After all you need to account for 3%-4% inflation as well as any future GST hikes like the jump to 9% next year. With the increasing cost of healthcare, it’s also important to get covered early while premiums are more affordable.
If you’re still on the fence about how to strengthen your savings, take some tips from our very own Singlifers who share how their financial decisions have shown them a better way to grow their money.
Remember, it’s never too early or late to start growing your money. Whether you decide to make the leap into investing or want to speak to a professional like Carolina to plan out your options, there’s still time to make a difference.
Notes
These policies are underwritten by Singapore Life Ltd.
This is published for general information only and does not have regard to the specific investment objectives, financial situation and particular needs of any specific person. You may get a copy of the Product Summary from Singapore Life Ltd. and the participating distributors’ offices. You should read the Product Summary before deciding whether to purchase the product. You may wish to seek advice from a financial adviser representative before making a commitment to purchase the product. If you choose not to seek advice from a financial adviser representative, you should consider whether the product in question is suitable for you. As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid. This is not a contract of insurance. Full details of the standard terms and conditions of this policy can be found in the relevant policy contract.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the Life Insurance Association or SDIC websites (Home or Singapore Deposit Insurance Corporation - SDIC ).
