When it comes to handling money, we could all do with a little extra guidance. With inflation and economic uncertainty on the rise, there’s no better time to think about how to grow your family’s wealth, retire comfortably and plan a brighter future for your kids.
Bryan Chan, Client Adviser at Providend, and Daniel Dal Molin, a financial advisor at Global Financial Consultants, share their expert advice for saving, budgeting, investing, and choosing a wealth planner.
Q: What financial concerns does the typical Singapore family have today?
Daniel: The risk of inflation is certainly affecting the average family’s spending power on a month-to-month basis. Prices at the supermarket, for instance, are a bit higher now, after many years of being more or less unchanged.
Families are also worried about whether they have enough money to retire on. They may be saving 10% of their income every month for their retirement fund, but they’re concerned that this amount may not be enough.
Q: How much should young families save for their future, seeing as the economy is so unpredictable right now?
Bryan: Although costs seem to be rising relatively quickly in the short term due to supply chain disruptions, keep in mind that long-run average inflation ranges from 2% to 3%, despite short-term fluctuations. Whether this heightened inflation will persist isn’t something we can predict. It’s reasonable to say that you should plan for your general spending needs using a 3% inflation assumption.
If you’re wondering how to afford costly expenditures, such as your child’s tertiary education, for instance, then you have to consider where and what your child studies. However, historical data suggests that tuition fee inflation tends to be higher than general inflation at about 4% per year.
Q: Do you have advice for families when it comes to saving money?
Daniel: Pay yourself the first 10% of your net salary. This is money you’ll put aside before you pay all your expenses. You may want to invest this money over the long-term in the financial markets. If you start early you can invest in a more growth-oriented equity portfolio; if you’re starting late, you’d be looking at a more balanced share portfolio.
Bear in mind that individual shares are risky and can fluctuate. Be careful of your personal biases, invest in a good unit trust, or better still, a portfolio of unit trusts comprising some bonds and equity funds.
Bryan: Budgeting can help you spend and save intentionally. Knowing how much you’re spending each month, and what you’re spending this money on, can help you make better financial decisions for your family. I recommend categorising your expenses into “essential”, “discretionary”, and “luxury”, and see where you can cut back if need be.
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Q: How can the average family grow their wealth if they’re not high-net-worth?
Bryan: There are several ways, depending on your needs, ability, and willingness to take risks with your savings.
For short-term savings goals, like an emergency fund, you can use relatively safe and liquid instruments such as term deposits, Singapore savings bonds or money market funds for a slightly better return than the standard bank deposit rates.
For medium- to long-term goals, it may be a good idea to invest in broadly diversified portfolios of stock and bond funds in an appropriate allocation that will allow you to capture the returns of the financial markets effectively. Whatever the level of risk involved, it should be comfortable enough for you to stay invested in times of volatility and keep down the costs that you’re paying to fund managers and distributors, as these can eat into the returns.
Daniel: If you want to invest, you should have an investment plan and not a hybrid insurance-investment product. The latter costs money and is neither an insurance product nor an investment product. If you need insurance, buy term insurance for what you need. If you want to invest your money, purchase investment products. Keeping it simple will save you money. Be wary of funds that have high entry costs, exit costs and switching fees.
Check out special insurance plans for SAFRA members at www.safra.sg/our-services/safra-insurance
Q: Can a wealth planner or adviser help the average Singapore family grow their money?
Daniel: Yes, they can help you set a plan for saving, spending and investing.
Bryan: A wealth planner can educate you on relevant financial topics, provide investment advice, and help you make changes along the way as your life and priorities change.
Q: What should we look for when engaging a wealth planner?
Bryan: A competent wealth planner should have your best interests at heart and ensure that you have a positive investment experience. They should also be of good character and have a pleasant personality,
It may be helpful to know exactly how your adviser is being compensated and what he does with his own money, so that you’re aware of any potential conflicts of interest or inconsistencies in the advice that you receive.
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