What should I do with my money? My situation: I have about 20k in my savings account, and I plan to keep about 5k-10k as emergency funds. I'll be beginning my NS journey soon, then university after. ? - Seedly
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Savings

Asked by Marc L

Asked on 13 Jun 2019

What should I do with my money? My situation: I have about 20k in my savings account, and I plan to keep about 5k-10k as emergency funds. I'll be beginning my NS journey soon, then university after. ?

So after scouring many different websites, blogs and even SeedlyTV, I still do not have much idea how to split my money. I have about medium to low risk appetite? Maybe slightly high is fine.

I am considering POSB SAYS (for NS pay), Temasek Astrea V, SSB, STI ETF (using RSP) and robo-advisors.

Open to other ways to grow my money as well but generally do not want too high a risk to lose the capital.

Any suggestions on what percentage to go to which area? Or is my captial too low to split?

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Arpita Mukherjee
Arpita Mukherjee, Community Evangelist at Kristal.AI
Level 6. Master
Answered on 13 Nov 2019

Hi Anon,

There are plenty of safe ways to invest your money and have it grow. You can go for REITs, other ETFs and bonds, but before you do that, I'd suggest you read up as much to understand what a Robo-advisor really does. Robo-advisory platforms assess your current financial position and recommend a portfolio strategy after reviewing your risk profile. These bionic advisors are still not very different from your ordinary financial advisors as both options will still have a management fee incurred for users. The difference lies with the amount, as Robo-advisors have lower management fees. And the best part is that they give you the most unbiased advice.

You can read here for a better understanding.

I work at Kristal.AI, and my mojo is to help people make the right financial decisions. If you think I helped you, do give me "Thumbs up". If you think my response was biased let me know, I will work on it.

I hope this helps you make the right decision.

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Takingstock @
Takingstock @
Level 6. Master
Updated on 14 Jun 2019

I am a believer of teach a man to fish, instead of giving him the fish.

I dont think its a matter of capital amt to split, 20k is plenty. You are fortunate to have 20k by the time you are heading into NS. So questions:

  • when you say you want to leave 5 to 10k for emergency, is there any specific concern you have in mind (given you are prob younger than 20)? Helps us understand how much responsibility / accountability you have vs your family

  • if you think about the full stretch, 2-3 yrs NS, plus maybe 3-5 yrs of university is a long time. Over 5-7 yrs, the compounding impact is somewhat important enough to sway decisions.

  • how are you financing university education? Borrow from parents cpf? Is it a local uni?

  • do you have a clear idea of what goals you may have after university? Like start a business?

I think you may be a bit risk adverse as you have heard horror stories of people losing $$. On another hand I dont know if you might be like studying medicine which would cost a bomb.

Some suggestions:

  • park some amount maybe up to 5k to cpf. You will "lose" 37% which goes to special n medisave. But dont forget whatever you putting in will earn 3.5 to 5% interest. Apart from helping you learn compounding, the oa portion can be used to pay for local university without having to borrow from your parents. When you finish your uni, you will be surprised by how much the sa and medisave amts are.

Note: 37% of 5k = 1850. Assuming you are 20 now, this will roughly double three times according to the rule of 72. I am thinking when you are 64, this 1850 will be 1850 x 2 x 2 x 2 = 14,800.

  • I am not sure if you are 21 yet, coz I don't know if you can apply for cdp acct, which is required to buy ssb or stocks. If you turn 21 in ns, please go apply then it will open up ssb as an alternative. I think from there, you can subscribe to the mas ssb newsletter, n monitor the next subscription. I would suggest buy 1k worth of ssb only each time if the 10 year average yield is above 2.2%. Wait if its not that good.

  • when you turn 21, you can also apply for like those monthly savings plan account. My only concern is you probably don't have a regular income, so contributing 200 per mth could prove to be a toll. If 100 per mth, the transaction cost would be too high n erode returns. So my suggestion would read up the investing, and eventually learn how to pick good dividing paying stocks. Only turn on the plan if stock or reit offers at least 3.5% yield. But you may need time to learn this.

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Takingstock @
Takingstock @

14 Jun 2019

Now that I have more info abt your background... For the bank account, choose one with low cost / fees and charges, and free ebanking, atm, then interest % as the 2nd criteria. Usually its 3k or 500 min balance. Check that your parents have medical and hospital insurance. If they dont have, buy asap. Who pays for it is another question, but it will help in the long run. Buy before they get diagnosed with health issues that commonly affect elderly. Choose b2 coverage at least
Takingstock @
Takingstock @

14 Jun 2019

After these two are addressed then I think you can think about using the rest of the 20k in the best way to finance your university education. Its most important is to make sure you can get the degree and not fail because you cant afford it. I might suggest split the balance three ways (cash / ssb / investment) prioritize investments so you get bang for the buck. You might think of it as can I get the passive interest / dividends to pay for own allowance without adding to family burden
Zeeeee
Zeeeee
Level 5. Genius
Updated on 14 Jun 2019

No doubt there's merit in Gabriel Tham's answer, I am a little more risk adverse and would dabble in various forms of investments. Ultimately, it's a matter of your risk appetite. What is risk appetite? Simply put, will it be fine if the sum of money you invested dwindle over the many years (with a potential but without guarantee of recovering fully)? If you're okay with allocating a small fraction of your cash worth to that purpose, I would say now is the best time for you to learn and explore. You might not have the time after NS whilst in Uni or in the workforce to do so. SSB is definitely one solid option (higher rates than your SAYE and inherently similar liquidity as your SAYE). The Astrea V minimum investment amount is 2K which might be quite a huge sum for your case.. if you're getting SSB of about 3k, I'd suggest you allocate another 2+k to stocks -- but don't go for a basket of them, go for a single company you believe strongly in!! gotta do your research for this. Other options are worth considering (ie P2P or Robo) but ultimately it depends on your risk appetite. Use these two years to learn and experiment!:)

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Zeeeee
Zeeeee

14 Jun 2019

It's just my personal take but 50% of your net worth in bonds at your age is a little excessive and unbalanced I feel.. plus astrea V is non guaranteed as compared to SSB. don't get be wrong I'll be buying into astrea V too, it's just that with your limited capital at the moment perhaps you shouldn't get too much bonds and rather have a good mix between the various investment classes. 2K might not seem like much but it's 10% of your current net worth after all.. I would suggest getting maybe
Zeeeee
Zeeeee

14 Jun 2019

Two to three stocks and really understand how the stock market volatility or lack thereof works. when I was in your shoes two years ago I bought into many many stocks and yes on one hand there's the issue of pricey commissions.. on the other it's rly hard to track each stock when you feel like doing short term eventually. I'd rather have a smaller but sharper and more focused portfolio. ultimately everyone has their own preference you just gotta try it out and learn from your mistakes :)

You can start with Singapore savings bond as a safer way to get better returns.

SInce your time horizon is not that long before university starts, expenses start to kick in too (NS free food, free lodging etc).

POSB SAYS is a pretty good scheme for that extra interest boost too.

I would leave out STI ETF and robo for now. These would be a long term investment and require a longer time horizon.

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Marc L

14 Jun 2019

Hi, why would STI ETFs and robo be not advised? In terms of long term investments, isn't it better to start ealier? Do advice as I'm kinda new to this šŸ˜…
Fiona Loh
Fiona Loh, Analyst at Deloitte Consulting
Level 4. Prodigy
Answered on 19 Nov 2019

Since you're in NS, i believe you're under 27. Firstly, have an account that generates higher interest.

Open up the Standard Chartered Jumpstart account, & park your money in there. Note that it should be capped at $20k, as the 2% p.a. is only effective for $20k. in there. This will give you appx $33.33 per month, for the $20k.

For your remaining amt,you may look at some other instruments. You probably might not want to consider bonds, given it's low yield during this period time. However, to get started in investing, please be equipped with the knowledge first. You might want to start off with the ETF which tracks the performance of the market. Historically, the S&P500 ETF have been generating 9% annualised returns, & STI ETF have been generating 7% annualised returns. Of course, past performance is not indicative of the future, so please DYODD. You can either use a DCA method for this or buy in when the market is at it's low. Either case, both works :)

Hope this helps :)

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