As one of the most affluent cities globally, Singapore has many financial-savvy residents. But Singaporeans are surprisingly unaware of their financial literacy. A 2019 GoBear Study has shown as much. Singaporean women, in particular, underestimated their perceived financial literacy.
It could be a result of mere humility. But even so, Singaporeans should realize their fantastic potential regarding personal financial management. They can start by hitting the following financial milestones:
1. Plan for Retirement
A 2021 survey has found that 97 percent of young adult Singaporeans have begun planning their retirement. One possible reason is the availability of the Central Provident Fund (CPF) system. It is a mandatory social security savings funded by employers and employees. One of its objectives is to meet retirement needs.
To start your retirement planning process, contribute to your CPF regularly. You shouldn’t have a problem with this if you are employed because your contributions get deducted from your monthly paycheck. But if you are self-employed, you may forget your contributions. Hence, set up your CPF contributions and fund them every time you’d profit.
In addition, save a little every month and put it into your savings account. Don’t stress yourself with how much you need to save. Keep any amount you can, and don’t spend it.
You can also set up automatic CPF contributions in your bank account. Go to your branch and ask how the process is done. Your bank will take care of it if you keep your account funded.
Budget for your retirement based on what you may need when you age. One of those needs is undoubtedly healthcare. Though your health insurance can cover your treatments, major treatments may not be included in your policy. But, more importantly, maintain your good health so that you can retire without any illness.
2. Invest Money
Your savings account is considered an investment. Hence, consider this milestone accomplished. But if you haven’t bought securities yet, like life insurance, stocks, bonds, or mutual funds, do it soon. Ideally, you should start investing while you’re still young. It will give you many years to grow your money, allowing you to retire a millionaire, depending on the security you bought.
Investing money will also help you build retirement savings. High-yield securities, like stocks, take years to earn, so you’re most likely retired when your investment doubles up. But you can earn dividends from your stocks every year or whenever the companies decide to distribute them.
3. Get a Loan
Being financially savvy doesn’t mean you shouldn’t borrow money. Many Singaporean young adults take out personal loans. Most of them do so to cover their daily expenses.
Getting a manageable personal loan can boost your credit score. Still, you need to pay it back on time to see that effect. The higher your credit score is, the easier it will be to get other loans, like a mortgage. However, avoid borrowing money from your friends or family, especially if it’s a considerable amount. They may not charge you interest, but being indebted to someone you know may tempt you to delay repayment. On the contrary, borrowing from a financial institution pushes you to be disciplined and responsible.
4. Stop Paying Minimum Credit Card Balances
Many people think paying their minimum credit card balances helps them save money. But it does the opposite. Sadly, Singaporean millennials are also fooled by this misconception.
It’s OK to pay your minimum credit card balance if that’s what you can only afford at the moment. But making it a habit can hurt your credit score. In addition, your interest increases when you only pay the minimum balance. Hence, use your credit card only if you can afford to pay it in full so that you’ll never be forced to make partial payments.
5. Consider Estate Planning
When you reach your 50s or 60s, consider starting an estate plan. Estate planning involves creating a will. It may seem grim to think about your death while enjoying your money, but estate planning can save your heirs from trouble when you pass on.
An estate planning attorney facilitates this process. They will handle the distribution of your assets after you pass away. It would help if you also appointed an executor who would execute your will after your death.
If you want to or currently have kids, you can start estate planning while they’re still young. Nobody thinks of dying young, but you need to prepare for the worst when raising children. Therefore, don’t hesitate to approach an estate planning lawyer when you see fit.
Don’t pressure yourself to hit these milestones before a specific age. When building wealth, you have your entire adulthood to accomplish it. Take small but sure steps towards all of these milestones.