So, you’ve signed on the dotted line for your first job, putting yourself in the position of someone with a stable monthly income. That’s a privileged position to be in, considering the slowing economic growth in the face of the Covid-19 pandemic.
Joining the workforce is perhaps one of the most notable initiations to adulting. So before you rally your friends for celebratory drinks, it’s important to first take stock of how you plan to allocate your newfound financial independence. This is vital because while a job means greater financial stability, it definitely doesn’t guarantee financial freedom.
Here are five easy tips to help you along.
1. Start a savings account
If you’ve been suitably exposed to personal finance content, you’d likely have encountered anecdotes or success stories about individuals savings their first $100,000 before the age of 30.
Such goals are achieved not by sheer luck, or even just hard work. It also takes a whole lot of discipline.
As a starting point, set up a proper savings account before starting your first job. Most if not all of us would have a basic POSB Savings account, but it’s now time to upgrade from that (and its 0.05% per annum interest rate) .
These are some of the best savings accounts to consider, and the requirements you’ll need to fulfill to reap the maximum interest rates:
| DATA | BANK OF CHINA (BOC) SMARTSAVER | MAYBANK SAVE UP | OCBC 360 | STANDARD CHARTERED Bonus$aver |
| Maximum interest rate per annum | 3.00% p.a. | 3.00% p.a. (on first $50,000) | 2.38% p.a. (on first $75,000) | 2.38% p.a. (on first $80,000) |
| Initial deposit | $1,500 | $500 (for Singapore Citizens and Permanent Residents) $1,000 for other nationalities | $1,000 | $0 |
| Min. monthly balance | $1,500 | $1,000 (waived for customers below 25 years old) | $3,000 | $3,000 |
| Base interest | 0.10% (less than $20,000; 0.15% for $20,000 and above and 0.20% for $100,000 and above)) | 0.15% (first $3,000) | 0.05% | 0.01% |
| Salary crediting | 0.3% ($2,000 to $5,999) 0.5% (for $6,000 onwards) | Optional | Salary of at least $1,800: 0.3% (first $25,000) 0.6% (next $25,000) 1.2% (next $25,000)f | Optional |
| How It works | Three bills: 0.30% bonus interest on three bills (at least $30 each, paid via GIRO, BOC iBanking or BOC Mobile Banking Bill Payment) Card spending: 0.3% (for $500 to $1,499 spend); 0.5% (for $1,500 spend or more) Others: 0.4% bonus (for account balances from $80,000 to $1m), so long as you’ve fulfilled one of the requirements for salary crediting, bills or credit spending. Wealth products: Purchase eligible BOC products to earn bonus 1.5% interest for 12 months | Choose to use up to three of its nine services (0.1% for one service; 0.7% for two services; 2.75% for three services). | Save: 0.1% (first $25,000); 0.2% (next $25,000; 0.4% (next $25,000) For this, your average daily bank balance must increase by $500 monthly. Insure: purchase an eligible product 0.3% (first $25,000); 0.6% (next $25,000); 1.2% (next $25,000) Invest: 0.3% (first $25,000); 0.6% (next $25,000); 1.2% (next $25,000) Others: 0.4% Maintain an average daily balance of at least $200,000 Note: The total effective interest rate (EIR) is not a cumulative of the above rates | Earn bonus interest by doing any of the following – Spend: 0.21% for spending $500 to $1,999); 0.41% for spending $2,000 or moreSalary: 0.10% for crediting salary that is at least $3,000 Invest or Insure: 0.90% for eligible products Bill payment: 0.07% by making at least 3 payments online |
Accurate as of January 2022
Essentially, banks reward you with bonus interest for saving and spending to different degrees, so figure out the best mix for you.
2. Get insured
We spent our early 20s shaking off our financial consultant friends and the, ahem, insurance plans they were recommending… only to realise later how important the things they were talking about actually are.
What was previously boring and unimportant has suddenly become concerning and often, things we wish we were more savvy in. That’s adulting for you — and starting early is a good idea.
These are three key types of insurance plans to know:
- Whole life insurance
Life-long protection, in which you or your family receives a payout after a period of time under unfortunate circumstances, or upon your death. - Term life insurance
Coverage on your life, but without a payout at the end of a specified period of time. Your coverage ends the moment you cancel or surrender your policy. - Health insurance
In case of hospitalisation, you’ll want access to more affordable treatments or coverage on your medical expenses
Don’t commit to the first plan you see, though. An insurance plan is a long-term commitment, and surrendering your policy often means losing a hefty sum.
3. Resist impulse-buying (and track your expenses!)
It can be easy to lose track of your daily expenditure, particularly if you have the tendency to spend with little thought.
Relook your expenses to determine whether you’re able to cut back on your spending. Is that daily $6 iced latte really worth the short-term enjoyment you derive from it? It might not seem much on the surface, but it’s the little things that add up; an atas coffee habit could easily set you back $180 a month.
Using an expense tracker app like Planner Bee also helps. Too often, we have little insight into where our money goes. When you conscientiously track your expenses, you’ll get an overview of your spending habits and identify patterns you weren’t previously aware of, such as how regularly you make frivolous purchases.
Keying in your daily expenses and watching those small purchases add up can be a rude awakening, but that’s exactly what we all need to avoid an excess of ‘treat yourself’ days. Besides, there are more budget-friendly ways of being good to yourself.
4. Passively invest
Beyond putting your money in a savings account, consider growing your money further by planting a sum in robo advisors, Singapore Savings Bonds (SSBs), or Exchange-Traded Funds (ETFs).
Investing should of course come after you’ve saved a comfortable amount, or a minimum of six months’ salary. That’s what we call an emergency fund, a kind of financial safety net that could cushion you should unexpected things happen.
So, what’s passive investing? Unlike active investing, the former is a low commitment means of growing your money over the long term.
Robo advisors are popular because they automatically help you invest in a variety of index funds, which often means more stable returns. They also involve less financial commitment. For instance, a robo advisor such as Syfe doesn’t require a minimum starting sum, so you could put in as little as $100 a month, or a one-time lump sum of $500.
Read more: Best Robo Advisors
5. Set small financial goals
We’ve all got financial milestones we hope to achieve, whether it’s saving up for a two-week holiday around Europe, or something more practical like setting aside enough for your HDB BTO downpayment.
If you’re feeling stuck, start by listing immediate wants, or financial-based goals you hope to achieve.
These could either be amount-based milestones, or goal-based milestones.
Next, put a price to them (an estimate is fine, but round it up for inflation purposes) before rearranging your list in order of priority.
Here are two examples of financial milestones:
- The amount-based milestone
To save first $15,000
To achieve this, you’ll first need to estimate how many months you might take to save $15,000.
Let’s assume you get a take-home salary of $2,500 after the mandatory 20% CPF deduction. Your expenses — transport, daily meals and subscriptions to Spotify and Netflix — amount to $1,000.
With the remaining $1,500, you could choose to set aside the entire sum for ten months, thereby unlocking your first amount-based milestone of $15,000 in savings.
After achieving this goal, you could then grow your savings by putting a portion of it into conservative investment options, whether a robo advisor or Singapore Savings Bonds (SSBs). - The goal-based milestone
Save $3,000 for two-week Europe trip (including flights)
Working off the above example — based on a take-home salary of $2,500, and $1,000 in monthly expenses — let’s say you’re now planning a two-week holiday to Europe in six months’ time, which you estimate will cost you $3,000.
Of the remaining $1,500 from your salary, you could choose to set aside $500 for six months.
A bigger goal-based milestone, such as saving $25,000 for a wedding, would involve more long-term planning, so do your due diligence by working on your milestones early.
Figure out your personal finances with one of Planner Bee’s helpful calculators, which cover everything from emergency funds, insurance, investments, mortgage, and retirement.
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