For most people, Singlehood is an iconic period of excess and enjoyment. However, due to circumstance and personal habits, it can also be a period when you accumulate debts, make financial mistakes or neglect saving for the future.
As a single person, how can you make good use of your independence and opportunities to take care of all your financial needs, both current and in the future?
Let's try to keep it simple. Here are the top FIVE things that all smart singles need to have in place:
1. Liquid savings
This means cashflow (read: money in the bank). Which means money saved on a regular basis and put away in an account that you won't access for spending. Budgeting is a key driver of your success here – as all your regular expenses are borne by you, you'd want to manage them with discipline to avoid overspending.
You should also have a liquid emergency fund set aside, as you won't have your spouse or partner's income to fall back on, should there be a crisis that requires money or if you suddenly lose your income.
2. Life Insurance
While you may not have a spouse or children who are financially dependent on you, you may still wish to purchase a small amount of death cover, to ensure you’re not passing on your outstanding loans and debts, such as credit card bills, on to your elderly parents or other family members.
3. Health insurance
It’s easy to think of yourself as invincible when youth is on your side but health insurance is best purchased when you're still young and healthy to enjoy full coverage. In Singapore, MediShield provides basic medical coverage for hospitalisation and surgery expenses. You can also purchase Integrated Shield plans from private insurers such as Aviva for higher coverage. The premiums for Integrated Shield plans are payable from Medisave.
You should take note that Shield plans come with deductible and co-insurance. Deductible – or excess – is the initial amount you need to pay before the medical cost is covered by your insurance plan. Co-insurance is the percentage of the bill you need to pay to co-share the bill with the insurer, usually 10%. You'll need to ensure you have enough liquid savings to take care of the deductible and co-insurance, in the event of a medical emergency. Alternatively, you can weigh the potential out-of-pocket costs against the premium and consider purchasing a rider from your insurer that covers the co-insurance and/or deductible.
4. Retirement planning
While your twilight years might seem ages away, it's best to start this early on, so that your money has time to grow. There are various vehicles available in the market to cater to different time horizons and risk profiles. You should sit down with a professional adviser to help you diversify and map out a good mix of accumulation tools to achieve your retirement goal.
As you get closer to your retirement age, you should focus on capital preservation as there's less time to rebound from large losses – plans such as Aviva's MyRetirement or MyIncomePlus that offers guaranteed capital and guaranteed returns¹ may be suitable.
5. Protection needs
No one likes to think about accidents but the most immediate and relevant aspect of having protection plan is to focus on living benefits. As the name implies, living benefits refer to payouts while you're alive, to give you financial protection against a variety of scenarios such as hospitalisation, major illnesses, disability, and so on.
Because you're the one and only source of income, it's all the more important to protect your income. Income protection plans in the market typically allow you to purchase coverage for up to 75% of your current salary. The benefit kicks in when you’re not able to work due to illness or disability, to provide an income replacement, so you can continue paying the bills and daily expenses.
If you are 40 and above, you should also consider long term care plans. Long term care is often costly and for a prolonged period of time. Yet, protection against the cost of long term care is often overlooked. ElderShield was designed and launched by the Ministry of Health in 2002 to provide an affordable severe disability scheme. All Singaporeans and PRs are automatically covered when they turn 40 unless they choose to opt-out. The scheme is designed to provide monthly cash payouts to help with the costs of long-term care in the event of disability. You can also increase the payout amount and payout duration with ElderShield-approved supplements, such as Aviva's MyCare and MyCare Plus.
¹Capital is guaranteed at the selected Retirement Age, and returns are guaranteed only upon policy maturity
