While you can get away with a few bad financial decisions as a young adult, it's time to get serious about your money now that you’ve hit the big 3-0.
Here are six financial mistakes that you don't want to be making in your 30s.
1. Not talking about money when you are planning for marriage
Discussing your financial plan, personal finances and spending habits with your partner is crucial before moving your relationship to the next step. This will prevent lots of disagreements and fights down the road. In fact, such topics should not be discussed just a few months before marriage. By then, you would have invested time and emotions into the relationship which causes couples to ignore major financial differences.
2. Going all out for first child
Due to lack of experience and the excitement of being first-time parents, many new parents make the mistake of overspending on their first child. You might want your child to grow up in a comfortable environment but ask yourself if it's necessary to spend thousands of dollars on a stroller or fancy clothes in different colours?
Rather than letting your child live comfortably, choose to let them live securely instead. The amount of money you save can be entrusted into his/her education savings plan such as Aviva's MyEduPlan which provides a 100% capital guarantee1.
3. Not prioritising retirement
There are many commitments when you are in your 30s but retirement planning should never be neglected. Money needs time to grow and by starting to build your retirement funding at a young age, it can be easier to retire early and have sufficient funds to last you through retirement.
There are many ways to save and invest to build up your funds. If you are not savvy with investments, consider an endowment savings plan from an insurer or a bank where you can contribute to on a monthly basis.
An example would be Aviva's MyRetirement which offers guaranteed returns2 of up to 2.38% per annum and choice of retirement age – 50, 55, 60, 65, 70 or 75 Age Next Birthday (ANB)3 before you start receiving the payouts for retirement.
4. Not having a hospitalisation plan
Your employee insurance may cover work-related injuries, visits to the general practitioner (GP) and hospitalisation. But one thing to remember is that the health insurance cover from your company alone isn’t enough.
Employee health insurance usually isn't portable which means if you ever leave the company, you won't just lose your job – you'll lose your health coverage too.
It's better — and often cheaper — to take out an insurance policy early when you're still healthy as premiums are likely to be lower.
5. Not having critical illness insurance
Critical illness insurance often gets put on the back burner as most people in their 30s think they are still young and healthy.
While your health insurance takes care of hospitalisation and perhaps outpatient treatment, your critical illness plan gives you a sum of money that you can use to take care of all other costs such as regular bills and daily expenses that still continue despite your loss of income while on no-pay leave.
At younger ages, your premiums will also be cheaper. Using Aviva's MyEarly Critical Illness Plan as an example, we look at how age will affect the yearly premiums for your insurance:
|Profile||30-year-old male, non-smoker||45-year-old male, non-smoker|
|Coverage||S$200,000 sum assured till age 60||S$200,000 sum assured till age 60|
Insurance plans such as Aviva's MyEarly Critical Illness Plan provides flexibility for policyholders as it enables them to choose the duration of policy terms – from 10 years up to age 99.
Alternatively, you can simply add on another rider onto your existing life policy. An example would be Aviva's Early Critical Illness Cover rider which is attachable to Aviva's MyProtector Term Plan.
6. Assuming you will have more money in the future
One common mistake by young professionals nowadays is that they assume their salary will always increase. While this may be true, this is not a legit reason to spend and not save. Relying on future income and always assuming you’ll make more money is poor financial planning.
The future is full of uncertainties and you might be faced with retrenchment if the economy is not doing well. Your best bet is to live within your means and be prepared for rainy days and start saving today!
¹100% capital guarantee: The total Guaranteed Cash Benefits payable will be at least 100% of the total premiums paid over the policy term.
²Guaranteed returns of up to 2.38% per annum is only upon policy maturity. This is based on an entry age of 17 Age Next Birthday (ANB) with eight years limited premium payment term where customer will receive Monthly Guaranteed Retirement Income of S$1,000 based on 75 (ANB) as selected Retirement Age.
3At start of the Plan, you can choose from our range of Retirement Ages available. They are 50, 55, 60, 65, 70 and 75 (ANB). Payments of the monthly Guaranteed Retirement Income Benefit will start one month following your selected Retirement Age.