Endowment Insurance

4 Smart Money Moves to Make in Your 20s

Here are 4 smart money moves you need to make in your 20s to put yourself on the path toward lifelong financial success and eventual freedom.

You’ve just stepped into the working world and would, therefore, expect to have plenty of disposable income in your hands. In reality? You’re already living from paycheck to paycheck. Now, imagine: if money is already so tight, how would you cough up the necessary sums for your wedding expenses, home mortgage loan, or family expansion plans? Thankfully, being in your 20s means you’ve still got plenty of time to build your wealth! So here are 4 smart money moves you should make ASAP to ensure future financial success.

Create a Budget and Maintain a Positive Cash Flow

Take-Home Salary 4,000 (S$)Take-Home Salary 6,000 (S$)Take-Home Salary 8,000 (S$)
Necessities (50%)2,0003,0004,000
Wants (30%)1,2001,8002,400
Savings (20%)8001,2001,600
Table showing allocation of monthly take-home salary (after CPF deductions) according to the 50-30-20 budget framework.

Your priority should be maintaining a positive cash flow. You can do that by creating a budget – and, more importantly, staying within the limits you have set for yourself. A simple budgeting framework to use is the 50-30-20 rule, where you spend roughly 50% of your take-home salary on necessities, no more than 30% on wants, and at least 20% on savings, investments, and emergency expenses.

Find allocating 20% of your income challenging? Then find ways to cut down on your expenditure on the ‘needs’ (e.g., switching to a cheaper electricity retailer) and ‘wants’ (e.g., reducing the number of nights-out with your friends) portion of your budget. That said, don’t go into penny-pinching mode. Your budget is a tool to help you create a positive cash flow, not a joy-sapping straitjacket.

Maintain a Good Credit Score to Unlock Benefits

Home Loan Amount (S$) Over 25 YearsTotal Paid At 1.3% Interest RateTotal Paid At 1.8% Interest RateTotal Paid At 2.6% Interest Rate
Table showing the difference in total loan repayment amount based on varying interest rates. Figures obtained via DBS’ ‘Repayment Calculator’.

Your credit score is a 4-digit number that ranges between 1,000 to 2,000 (AA rating of 2,000 being the best) – and is an aggregation of your credit history across different banks and financial institutions. Banks and other lenders use your credit score to gauge how likely you are to default on your debts. In general, the higher your credit score, the more likely you'd be able to negotiate for a greater loan amount, get it more quickly, and at better interest rates.

Doing the math, if your home loan interest rate were 2.6% instead of 1.3%, you'd end up paying S$94,592 more for an outstanding home loan of S$500,000 with 25 years left. Thus, highlighting the importance of building a good credit score in your 20s. To do so, you’ll need to pay all your debts on time, limit your number of open credit facilities, and keep loan application inquiries to a minimum.

Build an Emergency Fund to save for Uncertain Times

An emergency fund is a sum of money set aside for accidents, sudden injury, or an unexpected loss of income. Start building up your emergency fund while you're still in your 20s; it helps create a financial buffer that can keep you afloat in a time of need without turning to credit cards or high-interest personal loans.

How much should you have in an emergency fund, though? A general rule of thumb is at least 3 to 6 months' worth of living expenses (note: this refers to your monthly budget's 'need' portion).

Invest in the Right Insurance to Secure Your Financial Future

The next step you should take is to take up a suitable insurance plan, so you can rest assured that your loved ones won’t be saddled with a pile of bills should anything untoward (e.g., terminal illness or death) happen to you. But with so many insurance plans available, how would you know which to choose? If there’s anything the pandemic has taught us, it’d be this: financial flexibility is a must. And that’s where Tiq Easy Save by Etiqa Insurance truly shines. This unique insurance savings plan boasts:

  • High crediting rates: Enjoy a guaranteed 2% p.a. crediting rate for the first 6 years to optimise your savings and achieve your financial goals.
  • Short premium term: Tiq Easy Save has a premium payment of 1 or 2 years. If you make an upfront lump-sum payment, you get to enjoy 1.5% off your 1-year premium amount.
  • Free partial withdrawal: You may perform partial withdrawal(s) without incurring additional charges under certain circumstances.
  • Death benefit: Tiq Easy Save offers a death benefit of 101% of Account value upon the insured's death during the policy term.

What are you waiting for? Get the assurance of life protection with greater savings today! Terms apply.

This policy is underwritten by Etiqa Insurance Pte. Ltd. (Company Reg. No. 201331905K).

As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid. You are recommended to read the Product Summary, Policy Illustration and policy document for the exact terms and conditions, specific details and exclusions applicable to this insurance product that can be obtained from any of our product distributors; and seek advice from a financial adviser before deciding whether to purchase the policy. In the event that you choose not to seek advice from a financial adviser, you should consider whether the policy is suitable for you and meets your needs in light of your objectives, financial situation and particular needs. This content is for reference only and is not a contract of insurance.

Full details of the policy terms and conditions can be found in the policy contract.

This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the Life Insurance Association (LIA) or SDIC web-sites.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Information is accurate as at 30 September 2021.

Duckju Kang

Duckju (DJ) is the founder and CEO of ValueChampion. He covers the financial services industry, consumer finance products, budgeting and investing. He previously worked at hedge funds such as Tiger Asia and Cadian Capital. He graduated from Yale University with a Bachelor of Arts degree in Economics with honors, Magna Cum Laude. His work has been featured on major international media such as CNBC, Bloomberg, CNN, the Straits Times, Today and more.

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