Still dun wanna emigrate?
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Sep 21, 2008
YOUR PERSONAL ADVISER: FINANCE
</TR><!-- headline one : start --><TR>NSman needs ways to save $30k for varsity
</TR><!-- headline one : end --><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->Q I am a full-time national serviceman matriculating in August 2010.
I have about two years to save up for my varsity tuition fees. I don't want my parents to take money out of their Central Provident Fund accounts to cover my fees. I don't want to take up a bank loan either. How can I save about $30,000?
I have about $5,000 to $6,000 that I can use for investing, but I'm unsure what to invest in. What are some suitable options?
Also, what advice would you give a beginner like me who wants to know more about investing? Are there books I could read that would help me understand the various investment options and risks?
A To accumulate a lump sum of $30,000 in two years' time, you would need to channel your current savings of $6,000 into an investment that could grow at a compound rate of 124 per cent a year. This rate of return is unrealistic, and you should be wary if anyone entices you with an investment programme that promises such extraordinary returns.
A promise of unrealistic returns with little or no risk sounds too good to be true and usually is. Sadly, many people still fall prey to such investment scams because of greed or lack of financial literacy.
Based on your current savings of $6,000 and your two-year time frame, you would need to set aside at least $900 a month to accumulate $30,000. Let's assume that your savings are invested in a globally diversified portfolio of equities and bonds. Typically, such funds can generate an average return of 6 to 8 per cent a year.
However, setting aside $900 a month might prove challenging if your only source of income is your national service allowance.
You might need to supplement this with other income by giving tuition or doing freelance work, for instance.
I would suggest that you do not rule out the option of applying for the Tuition Fee Loan Scheme. One excellent feature of the scheme is that the bank does not charge any interest on the loan until the student graduates. If the student can set aside sufficient savings during his schooling years, and make a full, lump-sum repayment immediately upon graduation, the loan is interest-free.
In your case, for a three-year course, your investment time horizon would be extended from two years to five, as you would need to repay the lump sum of $30,000 only after five years, when you graduate.
The amount you need to set aside every month over the five years would be reduced to $300, which might be more manageable.
You can find good investment books at all major bookstores and at the National Library. One classic is The Intelligent Investor by Benjamin Graham - described by billionaire investor Warren Buffett, one of Graham's more famous students, as 'by far the best book on investing ever written'.
You can also find helpful information at the MoneySense.gov.sg website. Developed by the Monetary Authority of Singapore, this consumer education site offers many valuable and objective resources aimed at improving the financial literacy of Singaporeans.
Stanley Sim Chu Wei
Manager
Business Development New Independent Advice provided in this column is not meant as a substitute for comprehensive professional advice. E-mail questions to [email protected]
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Sep 21, 2008
YOUR PERSONAL ADVISER: FINANCE
</TR><!-- headline one : start --><TR>NSman needs ways to save $30k for varsity
</TR><!-- headline one : end --><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->Q I am a full-time national serviceman matriculating in August 2010.
I have about two years to save up for my varsity tuition fees. I don't want my parents to take money out of their Central Provident Fund accounts to cover my fees. I don't want to take up a bank loan either. How can I save about $30,000?
I have about $5,000 to $6,000 that I can use for investing, but I'm unsure what to invest in. What are some suitable options?
Also, what advice would you give a beginner like me who wants to know more about investing? Are there books I could read that would help me understand the various investment options and risks?
A To accumulate a lump sum of $30,000 in two years' time, you would need to channel your current savings of $6,000 into an investment that could grow at a compound rate of 124 per cent a year. This rate of return is unrealistic, and you should be wary if anyone entices you with an investment programme that promises such extraordinary returns.
A promise of unrealistic returns with little or no risk sounds too good to be true and usually is. Sadly, many people still fall prey to such investment scams because of greed or lack of financial literacy.
Based on your current savings of $6,000 and your two-year time frame, you would need to set aside at least $900 a month to accumulate $30,000. Let's assume that your savings are invested in a globally diversified portfolio of equities and bonds. Typically, such funds can generate an average return of 6 to 8 per cent a year.
However, setting aside $900 a month might prove challenging if your only source of income is your national service allowance.
You might need to supplement this with other income by giving tuition or doing freelance work, for instance.
I would suggest that you do not rule out the option of applying for the Tuition Fee Loan Scheme. One excellent feature of the scheme is that the bank does not charge any interest on the loan until the student graduates. If the student can set aside sufficient savings during his schooling years, and make a full, lump-sum repayment immediately upon graduation, the loan is interest-free.
In your case, for a three-year course, your investment time horizon would be extended from two years to five, as you would need to repay the lump sum of $30,000 only after five years, when you graduate.
The amount you need to set aside every month over the five years would be reduced to $300, which might be more manageable.
You can find good investment books at all major bookstores and at the National Library. One classic is The Intelligent Investor by Benjamin Graham - described by billionaire investor Warren Buffett, one of Graham's more famous students, as 'by far the best book on investing ever written'.
You can also find helpful information at the MoneySense.gov.sg website. Developed by the Monetary Authority of Singapore, this consumer education site offers many valuable and objective resources aimed at improving the financial literacy of Singaporeans.
Stanley Sim Chu Wei
Manager
Business Development New Independent Advice provided in this column is not meant as a substitute for comprehensive professional advice. E-mail questions to [email protected]
