Retirement is not an easy feat in Singapore with the ever-increasing population and rising cost. We are now living in an era where a majority of Singaporeans are either tied down by massive student loans, a colossal amount of HDB debts and meager starting pay. At the same time, the cost of daily necessities such as food and transport is always creeping upwards.
Today with the Internet, information can be found anywhere, anytime. Many self-driven individuals will take it upon themselves to figure everything out including financial planning. However, with the vast amount of information out there, it is hard to discern between what is true and what is not. This results in frustration in your financial planning journey.
Let us take a look at 3 common myths of Singaporeans in financial planning.
Myth 1: Financial Planning Is Only For The Rich.
Wouldn’t it be nice if you have an extra $100k sitting in your bank account? What would you do with that sum of money? Leave it in the bank? The average interest rate for the savings account is approximately 0.05% per annum; meaning to say you will get $50 of interest if you leave it in your bank account. Is that what you want? If you have no idea how to stretch your dollar, you should speak to your financial planner.
Individuals do not meet their financial goals mainly because of poor cash flow management, change in life stages or lack of knowledge to increase their wealth. Regardless if you have a lot of money to spare, it would be good to start financial planning early.
Myth 2: If I make a claim from my insurance, my premium will increase so I should not make a claim.
We often hear people saying that there is no use of buying insurance because their premiums would increase if they make a claim.
In general, there are 2 types of insurance – life insurance and general insurance. Life insurance covers individuals for their life, disability, critical illness, and hospitalisation etc. In Singapore, the premiums are tagged to risk pool rather than individual claims. Therefore, premiums will only increase if the risk of Singaporeans getting hospitalised were to increase.
On the other hand, general insurance i.e. motor insurance would be affected if claims were made. For example, a driver that has not made any claim within a year or more will be entitled to No-Claim discount (NCD). This is a discount offered by car insurers for those car owners who have not made any claims within a year or more. If the driver got into accidents and claims were made, the NCD would be revoked or reduced resulting in higher premiums to be paid.
Myth 3: I have life insurance from my employer. It will be sufficient for me.
Group insurance comes with great perks but it may not necessarily be sufficient. If you are single and without significant personal debts, group insurance might be enough to cover you in times of crisis. However, things will be different if you have a family or loans to pay off. More importantly, you will lose the coverage when you move on to a new role elsewhere or retrenched. Having personal coverage is the key to ensure that you would be protected regardless.
Often, you hear people saying that they have tonnes of time to sort their financial matters out and there is still a long way to go before retirement.
However, financial planning is not only about retirement. It can help to support you in the purchase of your first home, education or even career change. The truth is the earlier you start with financial planning, the easier it would be to attain what is most important to you. Don’t let the myths about financial planning stop you from achieving your dream. In order to get the most out of your finances, speak to your financial adviser. They will help you to research and plan so that you have one less worry in life!