Save for the future

All important things in life cost money – marriage, purchasing your first HDB, new-born, children education, taking care of parents in their retirement years, your own retirement. To add on to the money problem, all those mention have become more expensive as time goes.

A typical BTO HDB might cost $300,000 or more. Taking care of your parents during their retirement years easily cost tens or hundreds thousands of dollars. For children, if you are factoring in the price of diapers, food, health care, clothing, toys, education, it is going to cost more than you could ever imagine.

We have to be realistic when it comes to long-term financial plan as some money-related matters are out of your reach. It is because you cannot control how much education, housing, health care will cost. But there are issues which are within your control, like how much you spend or save.

There are no short cuts, it’s somewhat like dieting, and you need to follow it through before your waistline starts to show results.

Time is your best friend when it comes to accumulation. The sooner you start, the better it will be. Let’s say if you start to save when you turn 25. How much money do you think you will need to set aside to have $1 million during retirement at 65? $1000 each month? $2000 each month? You will just have to set aside $400 each month assuming it is earning 7% return each year. All you need to do is to set aside a total amount of $192,000 over 40 years to have $1 million at age 65.

What if you procrastinated and only started to save when you are 35? You will need to set aside $800 each month, which means the total amount is $288,000 with the same assumption of 7% return. This means procrastinating does come at a price. In this case, a 10 years wait will cost you close to $100,000 extra to reach the same goal.

Lesson learn: You have to be patient. Small amount of money if properly managed will turn into large amount of money in the future to cover cost of living during golden years.