Money, money, money!
Savings, investment, retirement planning and insurance experts share their top tips to help you start 2014 on the right financial note.
OUR EXPERT: Abraham Lum, client investment specialist from Fundsupermart.
You may already have made some investments, but these three tips will help you go further: 1 DON’T TREAT YOUR FUND LIKE A “GOLDEN GOOSE” Some investors judge a fund solely by its past performance, banking on potential returns without looking at the risks, says Abraham. “For instance, if a fund achieved a 10 per cent gain last year, they expect to see similar returns this year. But if markets fluctuate, the fund may not do as well. Then they get stressed and start making erratic investment decisions – buying one moment, selling the next – that can affect their entire portfolio.” 2 NEVER INVEST MONEY YOU’VE SET ASIDE FOR FUTURE USE This means cash you’ve saved up for family holidays, home loan repayments or funds for your kids’ education. “The more you can’t afford to lose that pool of cash, the more stressful your investment journey becomes,” says Abraham. Money for investments should be cash you’re prepared to lose.
A good way to stretch your money is to “invest in tranches – split up your funds into batches so you can invest each time the market dips,” Abraham suggests. “For example, if you have $50,000, you can have batches of $10,000 each.” 3 PLAN INVESTMENTS WITHIN YOUR RISK TOLERANCE Conservative investors can focus on bonds or fixed-income investments, which give an average of two to three per cent return on investment. These fluctuate less than stocks (also known as equities) and high-yield bonds, which may give you returns of five per cent or more, but are a lot riskier.
Abraham says: “If you can’t stomach market fluctuations, you’ll end up exiting your investments too early – and with losses.” He recommends a holding period – the length of time for which you hang on to your investments – of three to five years for global or regional funds. Or, decide what amount of loss you can live with, before selling or switching to another fund, he adds.
OUR EXPERT: Lilian Ng, senior executive financial planner from AXA Life Insurance.
Avoid buying too many insurance policies you can’t afford. Here are the top three plans every woman should have: 1 AN AS-CHARGED GUARANTEED RENEWABLE MEDICAL INSURANCE PLAN Most basic medical insurance plans cover hospitalisation and surgical fees. But not all plans are as-charged or guaranteed renewable. Lilian explains: “An as-charged plan means you can claim the full amount charged by the hospital – there is no need for co-payment on your part; guaranteed renewable means you are not excluded from claiming for hospital fees incurred, should you be hospitalised for a recurring condition.”
For example, you were hospitalised for dengue fever two years ago, and have just been admitted again. If your medical insurance plan isn’t guaranteed renewable, you won’t be able to recover your medical expenses. Guaranteed renewable plans exclude certain pre-existing conditions, so Lilian recommends that you get this as early as possible.
2 AN EARLY STAGE CRITICAL ILLNESS AND CANCER MANAGEMENT PLAN According to Singapore statistics, 14 people die of cancer every day. Among the different cancers, breast cancer is the top killer of women. But most medical insurance plans with critical illness coverage don’t cover you for the early stages of a disease.
“The definition of ‘cancer’ that allows for coverage is that it has to be malignant and spreading. But those who have just contracted it, or whose cancer cells are benign and not spreading, won’t be covered for their medical expenses.
“New plans for early stage critical illness and cancer management, like AXA’s 360° Cancer Care, provide protection and coverage from the moment you’re diagnosed, right through your treatment and rehabilitation,” says Lilian. 3 LIFE PROTECTION WITH CRITICAL ILLNESS PLAN Many types of life insurance plans are available, but more women are going for the ‘whole life, limited term’ life plan. “This means that you pay for a limited term – 10, 15, 20 or 25 years – but still get lifetime protection.
“When women quit their jobs to stay home with their kids, or retire completely, they may no longer have the earning power to afford their insurance payments. So while premiums are higher, most women opt for this type of plan because they can see themselves working for the next 10 to 20 years, then by the time they retire, they are done paying for their life insurance premiums, yet are covered for life,” says Lilian.
“Most medical insurance plans with critical illness coverage don’t cover you for the early stages of a disease.”
OUR EXPERT: Ho Lee Yen, chief marketing officer from AIA Singapore.
It is worrying that two out of five Singaporeans have not set aside a single cent for retirement, says Lee Yen. She shares three ways to make retirement planning easier: 1 START TODAY Ask yourself these questions to kickstart your planning: a) When do you intend to retire? This helps you determine the number of years left to save for retirement. b) What is your desired retirement lifestyle? This tells you how much you’ll need to live on each month. c) How long do you expect to live after retiring? About half of Singaporeans aged 65 today are expected to live beyond 85, with women expected to live longer – 23.3 years after retirement compared with 18.5 years for men. So we need enough savings for a longer period. 2 GROW YOUR SAVINGS PRUDENTLY Opt for investment-linked plans (ILPs) that combine life insurance and investment, and which start from as little as $100 a month. “ILPs are a good way to help your money grow as they have the flexibility to vary the level of protection and investment. When your children are no longer financially dependent on you, you can increase the level of investment to potentially earn higher returns for your retirement,” says Lee Yen. 3 STAY HEALTHY Maintaining your health is the best way to combat higher medical costs that will eat into your retirement savings, says Lee Yen. “Review your health insurance coverage regularly to avoid financial strain in your golden years – the older you get, the more health care you’ll require.”
OUR EXPERT: Tok Geok Peng, senior vice-president of consumer deposits at DBS Bank.
Savings are the first and most important step to ensuring your financial well-being. Here’s how to make managing your cash flow less painful: 1 PUT ASIDE 20 PER CENT OF YOUR MONTHLY INCOME IN A SEPARATE ACCOUNT “Get a savings account that automatically deducts an amount monthly to accumulate your savings systematically. Some offer great rewards, like our Mysavings product, which offers tiered interest rates to encourage people to save,” says Geok Peng. 2 LOOK OUT FOR WAYS TO SAVE AS YOU SPEND Take advantage of credit card promotions. Use your credit or debit card – within reason – to earn those cash rebates or get discounts. Keep tabs on where to earn points or enjoy discounts, or at least make it a habit to ask restaurant or retail staff about promotions before you pay up.
“I rely a lot on mobile apps to keep track of retail or dining promotions for my cards. The DBS Rewards app also lets me redeem reward points at merchants instantly instead of waiting for vouchers to be sent to me,” says Geok Peng. 3 BE PROACTIVE WITH YOUR SAVINGS Geok Peng says: “When you’ve set aside six months of daily expenses for emergencies, don’t leave excess funds in your bank account. Invest them towards major goals such as your child’s education or your retirement.”
It’s the best way to make your money work harder for you.