What Will It Take to Afford to Raise a Child and Buy a Property in Singapore?
When you total the estimates of raising a child and buying a property in Singapore, it can easily add up to well over a million dollars. Fortunately, this is not a cost that has to be paid in one lump sum, but one that is spread out over many years. Even so, meeting such obligations can be a challenge. So, what does it take to be able to afford such amounts?
There answer is simple, but not easy. It is financial discipline, time, and the magic of compound interest. You should start saving and investing as early as possible, no matter how small the initial sums might be.
Here’s an illustrative example. Consider two people, one who starts diligently saving and investing from the age of 20, and another who only begins at 30. They both get a return of 5.5 per cent a year, based on the following two assumptions:
● Their savings accounts (or insurance savings plan) return 1.8 per cent per annum while their investment accounts return 9.2 per cent per annum (which is the annualised total return of the Straits Times Index from 2009 to the beginning of 2019 )
● They allocate half of their excess funds to savings and half to investments (e.g. mutual funds or liquid equity), for a total blended return of 5.5 per cent per year.
Now, let’s say they both save and invest SGD1,000 a month. How much would that turn to by the time they’re both 60?