Campus Articles || DBS & *SCAPE || DBS & *SCAPE Financial Literacy # 4
Planning for kids you don’t yet have or for your promising retirement may seem daunting. But by learning to plan now financially —for your grad trip perhaps—it’ll be much easier to manage your money in the future. Investment products are available every step of your life to help you along the way. (Check out Ah Boon’s plan below!)
When investing, there are different considerations :
- different asset classes (bonds, equity, balanced funds etc)
- risks associated with the funds
- portfolio diversification
- your cashflow etc
Stocks, or shares in the ownership of a company, tend to earn more than bonds, but can also be riskier. On the other hand, bonds are an ownership of a businesses’ or a governments’ debt. It’s like an “I.O.U.”, except they’ll pay you back with interest. Unit Trusts, or mutual funds give you an opportunity to invest in a mixture of stocks and bonds. All investment products contain a certain level of risk. Speak to a financial advisor who will help you put together a comprehensive financial plan.
Always ask about initial sales fees and potential performance charges.
How to start investing
Don’t be discouraged if you don’t have $10K to invest. With a Regular Savings Plan (RSP), you can start with a fixed amount of $100 a month. RSP uses the concept of dollar cost averaging (DCA).
DCA = buying more units when the price is low and less when it’s high. Over time, your average unit cost is lower than the average market price during the same period of time.
Avoid the uncertainties of market timing by not speculating on the right time to invest your lump sum capital.
Types of insurance:
A. Whole Life Insurance
Life insurance is to provide for financial relief when the unforeseen strikes. The payouts can be beneficial especially for items such as paying final expenses and debts, and providing an income for dependents. Living policy owners can also benefit in terms of disability coverage and annuity benefits. The key to this policy is that the coverage is for your entire lifetime.
B. Term Life Insurance
Unlike Whole Life Insurance, Term Life Insurance provides coverage only for a limited period of time. There are also plans that cater to a specific need such as mortgage insurance.
This is useful in disciplining your savings for a specific financial goal during the commitment period of the plan. Furthermore, it comes with protection.
D. Health Insurance
If you get into an accident, fall ill or become disabled, health insurance protects you and your family from the financial loss you could suffer by covering the cost of your medical treatment.
The most basic form of health insurance is MediShield, administered by CPF. You can choose to enhance the protection with a private health insurance plan to help cover additional expenses.
E. General Insurance
All non-life insurance falls under General Insurance — travel insurance, motor insurance, home contents insurance, and the like. Having a travel insurance plan can help you when you get into all kinds of sticky situations from trip cancellations to emergency medical evacuation.