Most of us wish to see a six-figure sum in our bank account. We all hope that that day would come sooner.
We have read the news of how young and savvy bankers or entrepreneurs have already made their first 100k well before they hit their 30s.
While most of us do not run businesses and are not born with a silver spoon in our mouths, it is still possible for us to see those golden six numbers before we turn 30!
Some may ask, why the need to save so much money though?
Assuming that you wish to buy a house, get married, start a family, enjoy good food, and go on overseas trips, well, money isn’t going to start raining from the sky!
The trick here is to take baby steps – starting with realistic and achievable goals.
Here are some ways you can save 100k in cash before hitting your 30s.
For simplicity, let’s assume the profile of a fresh graduate, aged 25, who has just started his/her first job and with the following profile:
- An average take-home pay of S$2,800 after CPF deductions
- Only paying for own allowances, basic bills (e.g. mobile bills) and family commitments (basic allowances for parents)
- Single, not married.
1. Save Half Your Salary
A general rule of thumb here is to save half of your take-home pay. Sounds crazy? We’ll break it down for you.
As aforementioned, your take-home pay refers to the salary that you receive after CPF deductions and any other statutory deductions.
In figures, this would mean that you save $1,400 per month.
A quick calculation would reflect total savings of S$84,000 over the next five years! And that is assuming that your monthly salary remains constant throughout, without extra cash from promotions, pay rises or fat bonuses.
The key here is to set aside this amount as “untouchable” money and use it strictly to save and grow your money nest.
One way to ensure that this works is to set a recurring auto-transfer request into a designated savings bank account either at the start of the month or after pay day.
2. Open A Savings Account With High Interest Rates
Heard of the saying: make your money work for you?
Well, your money is not going to grow if you just leave it locked up in your drawer. With banks dangling attractive interest rates, you can make your money grow without doing too much but just putting it inside a savings account!
There are numerous popular savings accounts such as OCBC 360 or UOB One Account that offer attractive yearly interests rates of up to 3.25% and 3.33% respectively.
Here is a breakdown of how much additional interest you can earn simply by saving with OCBC 360 and fulfilling some of their requirements!
The total interest per month may seem like a small amount, but do note that interest is calculated on a cumulative basis.
This means that the more money you have in your bank, the more interest you’ll earn! Additionally, you’ll earn even more interest by adding to a lump sum in the bank over many months and years.
3. Lock Your Money In Fixed Deposits
For some of us, we simply cannot resist the urge to spend.
This does not mean that it is impossible to achieve that 100k goal – it simply means that an alternative measure has to be taken, such as locking your money in a fixed deposit.
A fixed deposit essentially forces you to save a lump sum for a fixed period of time.
It could be 6 months, a year, five years or even longer depending on how long you wish to lock your money for. Additionally, fixed deposits typically offer a more competitive interest rate as compared to a savings account.
Some popular fixed deposits include Maybank’s iSavvy Time Deposit, offering up to 2.1% for a 3 year tenor with just S$25,000.
This means that your total interest earned would be slightly over S$1,500 – simply by locking your money in a time deposit!
However, you might be tempted to put your savings into a foreign currency fixed deposit, such as RMB or USD fixed deposits.
In this case, it is imperative to note that such fixed deposits are tagged to the ever-fluctuating currency rates. This means that your eventual interest earned upon maturity might not be as attractive as what was initially promised.
There are numerous promotional fixed deposits interest rates out in the market, so do your research before locking your money in one!
4. Invest in Single Premium Investment Linked Policy
Another lucrative way to make your money work EVEN harder for you is to invest in a single premium investment linked policy.
Sounds like a fancy term but essentially, the idea is that you pay a lump sum premium (often, it is a minimum of S$25k) to buy units in a sub-fund while enjoying insurance protection.
Simply put, you get best of both worlds – insurance coverage and investment of your money!
Some examples include AIA Wealth Pro Advantage policy, where you can enjoy the flexibility of customising your investment portfolio while enjoying certain insurance coverage.
Additionally, you can even opt to withdraw your earnings before the plan matures without incurring additional fees. All with just a single premium of S$5,000.
However, one thing to be careful of here.
These investment-linked policies typically do not have a guaranteed cash payout as the policy value is built upon the performance of the sub-funds invested in.
If the stocks that the fund manager invests in performs poorly, you might very well end up at the losing end.
Look for policies that offer a fixed guaranteed cash payout in addition to the non-guaranteed payout.
Do not be misled by the high non-guaranteed rate that is typically advertised and jump straight into it without doing your market research!
5. Buying stocks or shares
This is perhaps one of the quickest yet riskiest ways to boost your savings.
While there is no denying that investing in stocks can make you rich literally overnight, it can completely wipe out your entire savings if you are not careful as well.
The key here is to read up. Do your research and invest in stocks that are risk-adverse, such as Blue Chips or REITs.
One of the recommended stocks to invest in would be the dividend-paying shares, such as Real Estate Investment Trust (REITs).
In this case, dividends are paid out either quarterly or every half a year – allowing you to earn higher compounding returns on your stock!
A safer and less risky option would be to invest in Singapore Savings Bonds.
These relatively risk-adverse stocks are issued by the Government as part of an initiative to encourage long-term savings amongst Singaporeans. Furthermore, only a low minimum capital of S$500 is required.
6. Engage In A Freelance Or Part Time Job
For additional income, and if you have the time (week nights and weekends), engaging in a freelance job or working on side career could help boost your savings!
It could be anything – from being an Uber driver to giving private tuition or making use of existing skill sets (software skills, for example) for side gigs.
For instance, a part-time private tutor teaching at secondary school level could earn an average of about S$35 to S$40 per hour per subject. Assuming a frequency of twice per week for 2 hours, this adds up to approximately S$560 to S$640 per month.
Definitely a great way to supplement your savings!
7. Cut Back On Unnecessary Spending
Finally, save more by cutting back on unnecessary spending. Do you really need to get your caffeine fix at Starbucks or dine at cafes every weekend? Less spending translates to more savings!
A old-school trick to curb these “persistent” spending habits is to avoid credit cards.
These plastic cards offer you the temptation to spend with ridiculously high credit limits and promises of fantastic rebates and cashback.
However, when the credit card bills come, do you think these “fantastic rebates and cashback” is sufficient to help pay off your bills?
Saving 100k is not an impossible and daunting task! Simply follow these tips and exercise a little self-control when it comes to spending – you might very well see that elusive six-figure sum way before you hit 30!
(Header image credit: happyloan.sg)