Financial Planning for Young Singaporeans
One of the downsides of living in a busy city like Singapore is the high cost of living. Money is always a pressing issue. Your parents might provide for you until you turn 21 or graduate but after that? You’re on your own. As a young adult who’s just entered the workforce, you’ll have to start thinking about the future and saving up for certain stages of your life (if you haven’t already started doing so!). Marriage, for example. Getting a house. All these milestones of your life will require money and unimaginable amounts of it. You’ll almost certainly have to take out loans and start saving and repaying for the debts you’ll rack up. At this point, you might be wondering: So how?
There’s no point in worrying too much – everyone’s going to encounter the same problems. But with good financial planning, you’ll be able to cross the bridge when you get to it. Here, we’ll list out the various milestones that you should be saving for, and how much you should be saving to clear each of them.
An estimate: You will likely spend as much as $430,425 by the time you hit your thirties. The average Singaporean will likely experience the five most expensive milestones of their life when they hit 30. These milestones are: paying off student loans, getting a place of your own (BTO or EC), marriage, renovation, and providing for children.
Paying Off Student Loans (est. ~$21,000 onwards)
Even after you graduate, you likely won’t be completely free from the claws of school. If your parents didn’t sponsor your university education, you probably took out a loan you’ll have to start paying back a year after you graduate when you become a working adult. Depending on the monthly installments, you may have to pay off the debts you incurred in school well into your adulthood.
The choice of loan is important. You may choose from the MOE Tuition Loan, or use the CPF Education Scheme which draws from your parents’ CPF Ordinary Accounts. The MOE Tuition Loan covers up to 90% of your school tuition fees and an interest rate pegged to bank rates, while the CPF Education Scheme covers up to 100% and has an interest rate pegged to the OA interest rate. Interest for the MOE loan only starts when you graduate. For the CPF loan, interest starts to accrue from the moment money is withdrawn from your parents’ CPF accounts. Which loan you choose depends on your needs and your ability to repay the money. For example, if you think you can pay off your tuition loan in full for your entire candidature at university before you graduate, you may want to go for the CPF Education Scheme. But if you think you need more time, then go for the MOE loan.
Getting A Place Of Your Own (est. $300,000+)
When you decide to move out, you and your future spouse will probably make a decision to apply for a BTO HDB or an EC. If you’re going for the BTO, then you will have to settle costs such as option fee, stamp duty, down payment and balance of the purchase price before you even get to see the BTO. ECs are almost three times more expensive than the BTO, with heavier loan obligations.
First, you’ll have to decide whether you want to get the BTO or the EC. Each has its own eligibility criteria, including the loans you can apply for, so be sure to check. You will then have to take out a loan, such as the HDB loan or a bank loan. These also have their own criteria, such as interest rate, maximum loan, downpayment and late payment penalty.
Marriage (est $40,000+)
Time to tie the knot and live happily ever after with your new spouse! Except you still have the financial cost of the wedding to think about. Weddings don’t come cheap in Singapore, especially if you want to host all your extended family and friends. You’ll have to cover the costs of the banquet venue, catering, plus photoshoots if you want them. Although costs can be covered with wedding donations from your relatives and family, you can’t expect your loved ones’ charity to provide for the full cost. On average, you might cover up to 60% of the costs with wedding donations, but the rest will be on your and your spouse’s shoulders. An average Singaporean wedding costs about $43,000. To avoid fights about money, consider getting a joint bank account where each party can contribute to the payment.
Renovation (est $55,000+)
Now that you have a new flat, renovations are in order. It’s time to go shopping for furniture and other household amenities to make your new flat look like a home. The amount of money you need to pay for renovation mostly depends on the design you choose and the materials you’d like to use. Set a budget you know you can handle, and look out for furniture sales to save even more money. Though you can always DIY, if you’d like to hire an interior designer to furnish your flat to your specifications, a renovation will be costlier as well.
When choosing an interior designer, be sure to check out their credentials before hiring. Some interior designers also charge a higher cost for credit card payments, so take care to clarify payment methods with designers before you decide on their services. Lastly, when making your pick between cheaper and more expensive packages, consider if you’re willing to sacrifice quality for a cheaper price. After all, this is going to be your home for the foreseeable future, so make sure that you can live (literally) with your decision.
Welcoming A New Member Of The Family (prenatal and delivery: est $14,425+)
Not even taking into account baby items, giving birth itself will set you back about $21,870 or more, including prenatal packages, ultrasound scans, harmony testing and the delivery cost itself (which depends on the procedures involved). Cost also depends on which kind of hospital you’re checking into (private or public). Luckily, you can make use of the Baby Bonus provided by the government to make up for some of the costs. Plus, you can also claim Medisave for some of the hospital charges and procedures.
Raising a child is rather expensive, and breaking down the costs of child-rearing is beyond the scope of this article.
Almost every Singaporean will go through these five milestones: paying off student loans, getting a house, marriage, renovation, and children. The costs you incur may seem insurmountable, but with good planning and foresight, you can turn them from unassailable barriers to manageable problems.
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