The 7 Money Facts all Singaporeans Should Know by the Time They Turn 18
Turning 18 kicks in the beginning of a new life— financial independence, and with it comes responsibilities. It is that period when you need to start taking charge of your own finances. You’re never too young to know how to handle your money, and by the time you turn 18, parents expect you to have started attributing the most substantial portion of your life on personal improvements regarding money.
Many teenagers find themselves caught up in financial crisis due to lack of information, pure ignorance, or lack of interest. Being able to control your finances at a young age maturely does not only make you responsible but also display the degree of maturity in you. Here are the seven far-reaching money facts every Singaporean should know by the time they turn 18 for a solid financial foundation.
Inflate rate is 3% per annum
In Singapore, the core inflation rates evaluate any changes in the prices of goods which excludes the costs of private road transport and accommodation. According to reports by Trading Economics, the Singapore inflation rates have risen steadily with a 0.65 percentage rate in July 2018. This means that your money needs to match the inflation rate of three percent to prevent it from stagnating.
By the time you retire, you would generally appreciate your returns to beat inflation by over two percent per annum. It is also important to note that core inflation does not include private housing, which implies that it may be much higher for people who may not make it to purchase the HDB flats. However, it’s best to talk to a wealth manager or a financial advisor regarding this.
Invest in insurance policies
At age 18, much of your focus should be about your future. Such insurances as Health, Auto, Home, and life insurance policies are quite useful in your future life. Accidents and lawsuits are inevitable, and that’s why you need to invest in insurance policies to help you pay for injuries, damages, or any other bill in the event of an accident.
Everyone dreams of owning significant assets like houses, business properties and automotive, but no one ever thinks of possible accidents lurking behind these assets. The last thing anyone could wish for is to get a bank loan to put up a new house after the former has been swept away by floods, fire, or any other natural element. If you have your home insured, then you do not need to begin from scratch since your home insurance company will help settle the damage or the losses and keep your savings intact.
If you need to invest, consider comparing the return rates with the CPF risk-free rates
Young Singaporeans are encouraged to invest for their retirement funds through the Central Provident Fund (CPF) which are adjusted according to the rate of inflation. Currently, the rate is 2.5 percent. That’s why you should always weigh up your potential returns against the CPF every time you think about investing elsewhere. In an article written by Dr. Wealth, the restrictions made on your savings keep your money untouched till you are 55years, which even makes the deal better.
Your CPF money and the additional interest is wholly guaranteed. With that in mind, it’s crucial that you always compare the returns in every investment to ensure that it beats the CPFs 2.5% before proceeding. Otherwise, you are better off keeping your money in your CPF account.
The National Service can be a financial bonus
At age 18, you probably do not have a lot of responsibilities—wife, husband, or children to feed, shelter or clothe. That means you can convert all your energy into saving. The younger you begin working, the more chances you have of having good savings for the future. The National Service provides you with that opportunity. You can take advantage of it because it might be the only opportunity where you’re given free medical attention, food, and shelter. If you’re wise, you can save up half of the $300 to $600 monthly salary, and by the end of two years, you will have some reasonable amounts of dollars to sustain you before you get the best possible job prospects or to kickstart a small investment.
Know which loans cost the most
At one point in this litigious society, you will need to take credit to buy either a car or a house or even start a business. As a young Singaporean its essential to know the various loan costs. Here is the list according to the Monetary Authority of Singapore.
- Licensed moneylender loans: 48% although there are extra fees which contribute to a higher percentage.
- Pawn shop loans: 12% but you are required to pledge with an item such as jewelry
- Home loans: HDB loans are usually 0.1% while private home loans are 1.8% on average.
- Car loans: 2.78% for new cars but 3% for used vehicles.
- Personal loans: 6-9%
- Credit card loans: 24-26%, however, there is no interest if you repay the full amount for each billing cycle.
Don’t be shy about starting small
Everything has a beginning, and your financial journey doesn’t require you to earn big for you to save. The best approach is, to begin with, small manageable sums as you learn how to cut down expenses and later on advance to higher rates based on your income. That little amount will at one point grow interest and can make a life-changing difference in 10, 20 or even 30 years to come.
Carrying debt may invalidate you from a home loan
Regardless of whether you’re getting a home loan for private property or flat, you will be required to meet the Total Debt Service Ratio (TDSR) condition. The regulation restricts your total monthly loan payments to 60% of your total income. Your TDSR matters a lot when it comes to your debts—from your car loan to home loan and your various credit card loans. This suggests that you may not qualify for the home loan if you’re unable to control your debts when the time comes to purchase a home. The consequences may force you to take a lengthier loan tenure, buy a smaller house, or make bigger down payments.