Asked on 29 Jul 2019
Hi, I’m a 23 year old part-time student with $40k in savings and can save $3-5k a month. Where do you suggest I park my money? I'm pretty new to the personal finance world.
Wow that's amazing man! Congratulations! When I was 23, I was only thinking where should I party tonight. Hahah
You can consider opening a Stand Chart Jumpstart account, pretty easy to get 2% per annum. Others you can consider is DBS Multiplier. The Criteria is not hard to meet.
There are also other outlets you can begin with to grow your wealth, such as investing in STI ETF via Regular Savings Plan offered by banks, or even purchasing Singapore Savings Bond. All these options are pretty risk-free as I am doing it myself too :)
First, get educated on investing 1st. Then park the money into high quality stocks.
Alternatively can park money into high quality reits.
Try Stan chart jumpstart account. If you can't achieve the criteria, do Singapore savings bond.
At the same time, upgrade your knowledge about investing and look for ways to shortcut your knowledge GAP between what you know now and what you wish to know. This can be through mentors, books and youtube!
Saving $3K-$5K is tremendous and you should be proud of that.
I would say that $40K in savings is quite sufficient to cover 12 months of your expenses. Your monthly savings can and should be channeled to investments (you don't have to start immediately, but can earmark those funds for deployment)
You should look at gaining knowledge and starting your investment journey. There are plenty of asset classes to consider, so take time to understand their pros and cons before deciding what to look at.
Kudos on saving 40k at 23! Good savings rate as well - you're off to a good start.
How to Start Investing
1. Accumulate capital. Everyone needs to start with some investment capital. Also of your pool of available capital, decide how much you want to invest.
2. If you can, start as early as possible. Compound interest allows your account balance to snowball over time.
3. Open your CDP account (which you have already). For the benefit of those who haven't, sign up via the instructions here: https://investors.sgx.com/cdp-account-opening/#/form-selection
4. Open your brokerage account, and link your CDP account to it.
5. Understand your investment options.
There is a whole world of investment products out there from stocks, bonds, ETFs, mutual funds to the more exotic or less mainstream ones like art pieces, scultures, gold, and cryptocurrency.
Read up lots to understand your risk appetite, and form your own investment strategy.
6. Execution is everything
I always like to say that one can spend a decade reading and not deploy a single cent because of fear of procrastination. I always say to start early, and start investing in small amounts so that you can better understand yourself as an investor.
To begin, good job on saving this much by the age of 23 while studying! As a fellow newbie in the personal finance and investing world, I found the following steps really helpful as I dived into things.
TL;DR: As a newbie in the investing world, you should:
Check everything in the investment checklist, do your financial planning and work out the most ideal portfolio based on it
Park the rest of your savings in an account that will reward you with decent interest rates based on how much savings you have and your spending behaviour
Begin with an SSB, STI ETFs and Robo-Advisors portfolio as they are passive investments with low to moderate risks.
Here are 3 simple steps to help prepare you before you begin your investment journey:
#1 Start off by ensuring you’re ready to begin investing.
Do give our Ultimate Investment Guide a read! It summarizes everything a newbie in the investing world should know before they commence their investing journey. For starters, use this investment checklist to determine whether you’re ready to begin investing:
Have no debt on hand
Have spare cash (i.e. up to 6 months worth of emergency funds)
Possess investing knowledge, or else do your research first
Be ready to do your due diligence
#2 Do your financial planning
You can either DIY this on your own or get a financial advisor/planner if you require further guidance along the way. This Seedly article should be able to help you through your financial planning. Remember to answer the following questions during this stage too:
What’s your risk appetite?
What are your return expectations?
What’s your starting capital?
What are your financial goals for the future?
#3 Work out a financial portfolio
Now that you’ve done all the prep work, let’s move on to selecting the investment product(s) of your choice to build a well-diversified financial portfolio. Your portfolio should be built based on your answers to the 4 questions above in #2.
Here are some really useful Seedly articles that can help you pick the investment product of choice:
Now that I’ve introduced investing in 3 straight forward steps, let’s analyse your specific scenario and see where you can park your money to grow it.
$40k savings till date
For starters, I cannot stress how important it is to place your savings in an account that will help grow it at a decent interest rate as you focus on growing the rest of your money through investments. Here are our Ultimate Savings Account Guide and 3 Best Bank Account for Undergraduates articles that would be really helpful in deciding which savings account to get based on how much you have and your spending behaviour. Still not convinced? Did you know that parking $10k savings in the DBS Multiplier account can earn you over $2k of interests after 10 years (which is sufficient to fly you to & fro Iceland!) compared to leaving it in your POSB Kids account, which would only earn you a measly sum of $50. Read more in this article of ours!
Investing your $40k savings till date + $3-5k savings every month
Savings account aside, let’s talk about growing the rest of your money through investments. As a beginner, I’d recommend investing your money in:
Bonds. SSB is a good start!
Robo-Advisors. E.g. Stashaway, MoneyOwl. You get to adjust your risk level when investing with Robo-Advisors.
These investment products generally have low to moderate risks which would be great for investing beginners. They’re also passive investments which would be great for you since you’re still part-time schooling. The above articles I shared with you provide a great summary of these 3 investment products but please do your due diligence learning about them too! Making a lump sum investment would be appropriate with the remaining $40k savings after you’ve set aside your emergency funds and cleared any outstanding debt. On top of that, you can also do dollar cost averaging (DCA) with a regular shares savings (RSS) plan using your monthly $3-5k savings.
I hope this little guide was helpful and succinct. Once again, good job on making it this far and all the best for your future financial goals! :-)
Standard Chartered jump start account! The interest rate is 2% for the first 20K.
Then the rest can be put in cimb fast saver for 1% interest.
Then you can do RSP/DCA. :)
Firstly, go back to the basics and understand your cashflow. Through this process, it will allow you to understand your earning ability and spending habit. Here is a guide to help you: https://www.blog.pzl.sg/understanding-your-personal-cash-flow/
Once you have a clear understanding on your cashflow, set goals for the future, e.g. wedding in 7 years time, start a family in 10 years' time, children's education in 30 years' time, retirement in 32 years' time.
With the goals that you have, calculate the exact shortfall that you need to reach your goal. Then divide it over the number of years to find out how much you need to save today in order to reach your goal. Obviously, the result will be very large. This is where we are going to use the power of compound interest to help us. Here is why it works: https://www.blog.pzl.sg/what-is-compound-interest/
For channels that can help us grow our money, you may consider bonds (e.g. fixed deposit, singapore savings bond, corporate bonds), equity (ETF, blue chips, shares, options), or a balanced portfolio.
Each asset class has its own pros and cons. Understand your needs from the earlier step and evaluate how to optimise each asset class to help you reach your goal. Build and expand your portfolio that works well with one another.
When in need, speak with a professional who is capable of elaborating the details and to mentor or guide you. Ask him how he build his wealth and show it to you. By working with the right people, it shortens your learning curve by a huge mile!
Here is everything about me and what I do best.
STI ETF and SSB
This is because these 2 investments require little research, with your small amount of capital, more time can be spent on researching on ivnestment skills and our studies