Where should I begin?
My blog grows with me. Right now, I am at this stage of life where I’ve begun to look into my finances to save for the future. In my early twenties, I was concerned about my career, health and love life. I even had this dream of starting my own business and a green, eco-conscious movement. I wanted to be known as this eco-warrior that fights for the environment and a green influencer that will influence others to go green. However, my focus has shifted from my dreams to the future. With plans to settle down with my other half, guarding my finances and assets are of paramount importance. You’re right; this is what adulthood honestly looks like.
I began learning about the value of saving at a very young age. Money, to us, doesn’t come easy, and my parents would always teach me how to scrimp and save. As such, the concept of savings comes naturally to me. I’m prudent with my spending, and consequently, how to spend wisely. Instead of looking at how beautiful or attractive an item is, I would look at the intrinsic value of it to determine if it is worth the buy.
I’m turning 30 this early May, so what have I invested in so far? For me, I am a low risk-taker so I tend to go for low-risk investments. Of course, I will be looking into high-risk investments once I’ve gained more capital. After all, any investor would advocate diversifying your investment portfolio to fortify your investment moats.
1. Fixed Deposit
My parents, who are more experienced investors, suggested that I try going for fixed deposit in banks that issue a high-interest rate. This involves placing a fixed amount of money in a bank for a definite period of time. The interest rates tend to get higher if you are willing to put in your money for a longer period of time.
Fixed deposit yields higher interest rates than a savings account. Instead of keeping a lump sum of money in your savings account, why not transfer them in fixed deposit to earn a higher interest rate?
The only disadvantage is that you can’t withdraw out the money until it matures.
I used to sign up for 1-year fixed deposits in Bank of China as their interest rates are usually higher than other banks here in Singapore. The current interest rate now is about 1.8% interest (p.a). This rate is way higher than the current POSB savings account interest rate of 0.05%. I would recommend going for short-term fixed deposits just in case you needed the cash.
2. Savings Endowment Plan
An endowment plan is issued by an insurance company to help achieve your financial goals in future. It requires you fork out a yearly premium for some years or pay a lump sum of money to the insurance company and they ‘help you to save’. Depending on the type of savings endowment plan purchased, you may earn from a guaranteed interest rate or variable interest rate (depending on the market performance). The interest rates are often quite attractive. But do bear in mind that such plans are usually long term. It requires you to commit from about 5 to 25 years, depending on each plan. In fact, the 5-year term plans are very popular about Singaporeans, and insurance companies usually sold a limited number of such plans to their clients.
Interest rates can go up to 3% for endowment plans. (Currently, China Life Insurance has one of the highest interest rates for savings endowment plans).
You can’t withdraw the money until it matures. Some plans do not have guaranteed capital returns, and interest rates can fluctuate according to the market.
Opt for 5 or 10-year plans and start them as early as you can! I bought my first endowment plan when I was 23 years old. Don’t underestimate the power of compound interest! If you start with
3. Singapore Savings Bond
I can write a full article about bonds in general. In essence, Singapore Savings Bond is a flexible long-term investment (10-year tenure) with interest rates. It is issued every month for five years starting from 2015, and you can apply for it online through local banks like POSB and OCBC. You would also need to have a CDP account which you can apply online as well.
The bonds are safe, and the principal-guaranteed investments are backed by the triple-A credit rating of the Singapore Government. You can also withdraw the money anytime with no penalty.
There doesn’t seem to be any disadvantage in this case except if you feel that the interest rate of 2% is too low.
Unlike savings endowment plans, this has a much lower risk and it is more secure. If you purchase the bonds with $1000, you will receive an interest of about $234 at the end of 10 years.
4. Regular Savings Plan (RSP)
I first got to know about this through a stock investor who recommended beginners to start investing in blue-chip stocks. The regular savings plan allows you to invest a monthly fixed amount of cash into Singapore blue-chip stocks or an Exchange Traded Fund (ETF) that tracks the Straits Times Index (STI). It follows the dollar-cost averaging principle where profits and losses were average out over time. I have yet to find out more about the various blue chip stocks but I heard that it is great for those who are new to investing to find out more about the Singapore Stock market. For myself, I bought the POSB Invest-Saver plan where I bought two stocks – Nikko AM STI ETF and ABF Singapore Bond Index Fund.
The monthly investment amount starts as little as $100 per month. It is recommended for those who are not capital rich. There’s also no minimum time commitment required, and you can sell the units anytime you want.
This investment carries a particular risk. You will need to stay vested for an extended period to reap the benefits of RSP.
5. Multiplier Account
I recently just applied for a multiplier account under DBS. It is a savings account with a higher interest rate provided that you deposit your monthly salary into the account and make payments via your credit card etc. There are some terms and conditions to this savings account and more details could be found here.
It has a higher interest rate than a standard savings account. DBS Multiplier account offers an attractive interest rate of 1.8% to 3.5% per annum. The money in the savings account can be liquidated.
You will need to credit your salary and transact in one or more of the following categories: credit card spend, home loan instalment, insurance, and investments. The more transactions you have, the highest the interest rate you gain.
I hope you will find this article useful too especially if you are new to investments. It’s never too late to start looking into your finances now. I’m a late bloomer when it comes to finances because most of my peers are already well-versed in the various investment options.
In the upcoming months, I will be sharing with you what I’ve learnt about managing finances. I may not be as experienced as some financial bloggers out there who write up on various investment options, but I hope you’ll be able to take away something from my experiences during this journey.