facebookAm a fresh grad starting work (3.4k). Should I save or invest 1.5k/mth for 5 years in order to get ~100k to pay off my BTO share by 2025-2026? - Seedly

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Anonymous

20 Oct 2020

CPF

Am a fresh grad starting work (3.4k). Should I save or invest 1.5k/mth for 5 years in order to get ~100k to pay off my BTO share by 2025-2026?

Would like to pay off the HDB price largely by cash so I don't have to worry about paying back accrued interest or hitting basic/ full retirement sum 30 years later.
Stashaway suggests 1.5k/mth investment for 5 years in order to achieve 100k. However I will be stretching myself quite thin by locking that money up. How should I portion my salary if I intend to pay for the house that's ready in 2026 largely by cash?
Initially I was planning to leave 1.5-1.7k in savings acc per month.

Discussion (20)

What are your thoughts?

Hi anon, great question!

Firstly, i would like to point out that not all debt it bad. By paying the entire BTO in cash, you may be at risk of runnning low on liquidity when you need it. Considering that HDB loans have reasonable interest rates, I would be comfortable slowly paying off that debt instead.

Furthermore, 5 years is too short a time period for me. Anything can happen in the next few years. it is possible that a severe market crash may occur and you will not want to liquidate positions at a loss to pay for your housing.

All things considered, I personally would not strive to pay the majority of HDB by cash. Instead, I would set aside cash in a high interest account for a HDB downpayment and invest the rest. If you are able to save more, you can contribute it to the savings account and try to pay as much of the HDB as you can. but I think that trying to payoff the whole thing at one go may not be the best plan.

Hope this helps!

Ngooi Zhi Cheng

Ngooi Zhi Cheng

25 Aug 2021

Level 8·Student Ambassador 2020/21 at Seedly

Hi this is a good consideration. With 5 years, I would be alright to put the money into relatively safe investments through stashaway (if that is your preferred medium).

However do keep a close look on your investments, I would actually recommend taking out the sum in the next 1-2 years as your horizon shortens (depending on market conditions at that point in time)

What happens next would be to place this money into liquid, high interest accounts such as:

1) Syfe Cash + (not capital guaranteed, 1.5% p.a)

2) Singtel Dash Pet (capital guaranteed, currently around 1.2%)

3) Your personal HISA (High interest savings account) or short term endowments/fixed deposits at that point in time.

Lim Boon Tat

Lim Boon Tat

25 Aug 2021

Level 10·Mathematics at Cambridge University

With interest rates at all-time low (highest being 1.5% at any bank), i suggest loaning the money AS LONG AS possible, and not repaying it.

Hey OP, I'm also a fresh grad and intend to pay off my HDB by cash as much as possible so I understand your concerns.

Before diving in, I would just like to clear a misconception you might have. Stashaway investments are liquid so withdrawing the deposit is not an issue. It takes at most a few days for them to transfer to your bank account, but there is absolutely no lock-in period.

However, as mentioned by others, it may not be wise to invest the money given that your investment horizon is pretty short. If the market further dips due to unforeseen circumstances (e.g. another global pandemic or WWWIII... who knows eh? But touch wood haha) or undergoes a correction just as you're about to withdraw your money, your returns may not be as high as expected or worst still, decrease far below your target amount of $100k. Therefore, it might not be wise to invest the money which you intend to use for your downpayment, especially not in equities as they can be volatile.

Personally, what I'm doing instead is parking my money reserved for my downpayment in:

Standard Chartered's JumpStart Savings Account

This is a high-interest savings accounts (or what used to be high-interest anyway), which earns you 1% p.a. for your first $20,000. Eligibility criteria: only if you're 26 years old or below.

Singlife Account

This is an insurance savings plan which earns you up to 2% p.a. for your first $10,000. So far they have consistently credited the promised amount since I opened my account in June 2020, other customers have verified this as well. I was lucky as I joined early when it was 2.5% p.a. Nonetheless, 2% p.a. is still a really attractive offer given that most banks have decreased their interest rates. If you're also keen to start an account, you can click on my referral link which will reward both you and me with $10 each: https://app.singlife.com/Zlc9urWzwab

Stashaway Simple

This is a cash management account which has projected returns of 1.4% p.a. on any amount. Although there is still some risk involved, it is very little as compared to investing through their core portfolios. So far I've had pretty good returns as well. Again, much better than what I would reap if I were to leave the money in my bank accounts, they all have really dismal interest rates at the moment. If you're also interested to open a Stashaway Account, you can click on my referral link and we'll both get up to $10,000 SGD managed for free for 6 months: https://www.stashaway.sg/referrals/gabrielbkz

My Allocation

Here is an average breakdown of what I do with my take-home pay (close to yours):

  • 60% for future downpayment in Stashaway Simple

  • 10% for personal expenses (e.g. food, transport)

  • 8% for emergency savings (low % as I have amassed sufficient savings)

  • 10% for warchest

  • 12% for retirement savings/investments in kristal.AI

That said, if you're willing to take the risk to invest (really not advisable) in one of Stashaway's core portfolios, you might want to set it at a lower risk index.

Hope the above information is helpful and good luck on your journey to $100k!​​​

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Here are my 2 cents...

It is not wise to use so much cash to pay off your BTO HDB, as cash is king ...

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