Why should undergraduates/fresh graduates care about CPF? How important is it to have a basic understanding of CPF before receiving our first official pay cheque?

HI Casey, thank you for your question. When one is before 55 years old, there are 3 accounts in your CPF

1. Ordinary Account (2.5% p.a. - 3.5% p.a) - Primarily for paying off mortgage. Besides the first $20,000 that you cannot invest, you can invest what is above the $20,000.

2. Special Account (4% p.a. to 5% p.a) - Mainly for retirement. The monies in this account will be transferred to the Retirement Account (RA) when you turned 55. You can also invest your monies in the SA. Although I strongly discourage you to do so, given the very high, near risk-free interest rate of at least 4% p.a. currently.

3. Medisave Account (4% p.a - 5% p.a.) - Mainly to pay your medical expenses and approved insurance premiums

Since contributing into CPF is compulsory and it is your money, I think it is important to know how to best make use of it in your overall financial planning. I think it is important for you to

1. Understand how to optimise your payment of your mortgage when you buy your first house, ie to decide between using cash or CPF to service your mortgage. And if you decide to use part of your OA monies for investing, it is important to know more about CPFIS before doing so.

2. Understand the benefits of our Special Account, its high interest rates and to decide if topping it up as early as possible is advantageous to you, balancing it with the loss of liquidity once you do so.

3. To understand all the appropriate medical insurances you can purchase using monies in your medisave account.

The CPF is a useful "instrument" to make use of in your overall financial planning and that is why it is important to understand it, even before starting in the workforce.

Hope this helps.

Because it is your money.

While not immediately necessary to know, it is still a good idea to know what is being done with essentially, your money. Many seem to brush it off as CPF is more or less untouchable until you apply for a BTO/resale flat.

While I do recommend reading up on CPF contributions and employer contributions, OA,SA,MA, CPF LIFE, and using OA to pay for housing, considering that individuals don't have much control over where the money goes, it is objectively not important for undergrads/fresh grads to understand CPF.

The next hurdle IMO would be when applying for a BTO/resale. At that point one would most likely have sufficient amounts in their CPF accounts but still would be good to understand what is happening with their monies.