Saving or Investing 15% | MoneyOwl

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Saving or Investing 15%

Saving or Investing 15%

What is it?

Save or invest 15% of gross income (on top of normal CPF contributions).

Consider splitting the 15% of gross income into:
- 5% as top-up to CPF Special Account (on top of normal CPF contributions)
- 10% for kids or other long-term goals

Start lower than 15% if necessary, and build it up.

Increase by 1%-2% (of new gross income) per year – the higher the better, even up to 30%.

When investing bonuses, consider putting half into retirement and half into investing for kids/ other goals.

Why should we do this?

Grow your money with the power of compounding to beat inflation over the long term.

Long-term saving and investing build wealth and provide options in life.

If you have kids, the amount accumulated gives them options for higher education or purchasing their own home in the future. And if they don’t need it – it becomes your nest egg!

Securing your own retirement is for your kids, too – it means your kids won’t need to worry about you.

How do we do it?

Top up CPF SA first to Full Retirement Sum (FRS), before investing for retirement.
Use a suitable OwlInvest solution set for kids/ other goals, or for retirement after FRS limit is reached.

Example

I have a gross monthly salary of $4,000/mth.

I target to save/invest at least 15% every month in cash, which is $600/mth.
- 5% x $4,000 = $200/ mth
  I set up a GIRO instruction to top up $200 into my CPF SA every month.
- 10% x $4,000 = $400/mth
  I set up a Standing Instruction to invest $400 every month into suitable investments.

The next year, I have a salary increase to $4,200/mth.
I increase my GIRO instruction into CPF and investment both by 1% of my new salary.
- 6% x $4,200 = $252/ mth
  My new GIRO amount to top up into my CPF SA account every month is $252
- 6% x $4,200 = $462/ mth
  My new Standing Instruction for investments is $462

After budgeting, I keep my expenses within $2,600/mth

Attention

Pre-conditions for investing:

You have an emergency fund.
Your debt servicing ratios are healthy.
You don’t have high-interest debt: otherwise, pay off debt first.
You have a suitable risk appetite.
You need to be able to stay invested in a suitable portfolio.

Top-ups to CPF SA are one-way/ irreversible, so be sure that you do not need the money.

Additional Resources

5 Top Tips to Fire Up Young People’s Personal Finance Game

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