Small Change

When fresh options are a good bet

Sometimes, it makes more sense - and dollars - to go beyond the tried and trusted avenues

Apps such as food delivery service Deliveroo, ride-hailing platform Grab and accommodation option Airbnb have clicked with Singaporeans, given their money-saving features.

But when it comes to bigger-ticket financial matters, people I know - especially the older folk - steer clear of newer alternatives beyond the traditional ways, even if the fresh options yield better returns or are more cost-effective.

For example, you must have seen the barrage of advertisements from a new car insurer in town.

Its carrots are customisable coverage bundles and it dangles a $100 reward, subject to conditions, even if you do not take up its offer.

But reluctance to experiment and innovate is a difficult barrier to overcome. I have checked with my friends and many would rather stick to the status quo, believing that the lower premium is tied to reduced coverage or fewer perks, such as no 24/7 towing in case of a breakdown.

And they are not willing to spend time to confirm or debunk their preconceived notions, even if this act of omission leads to missing out on possible savings.

They also mention the hassle of submitting documents to apply for a new policy and the uncertainty over whether rebates built up over the years will be honoured by the new player.

Still, I feel that the time invested to thoroughly compare the options is more laudable than wasting time - and money - trying to boost their wealth by buying lottery tickets every week, as many of my friends and relatives do.

But they will bank on the tried and trusted when it comes to investments and not consider anything beyond, say, fixed deposits in banks.

The practice is particularly prevalent among the older folk who, to be fair, may not be very aware of what other options there are out there. There are online portals that dispense advice on investments but these people are not Internet-savvy and, even if they are, not comfortable yet about dealing with robot advisers.

Even the government-guaranteed Singapore Savings Bonds (SSBs) are not very well understood by my older relatives who, while vaguely aware of them, have no idea of how to buy the instruments or how to cash out if the need arises.

The need to open a Central Depository account - where the bonds are lodged - is also a deterrent, which prompts the question of whether there is an easier way to get around this hurdle. Could the bonds be linked to, say, a POSB account, which many people have?

Still, even for those with more knowledge of investment possibilities, broadening one's mind to a greater diversification of assets does not come instinctively or easily. Certain assets such as property and shares are almost default avenues to squirrel away money, in the often speculative hope of a windfall.

Take property, for instance. Many are seduced by the seemingly big gains that run into six figures. But a closer examination will reveal that the so-called windfall comes over a long period, and may work out to 4 or 5 per cent returns annually on average.

This is not a stupendous gain and people often have not deducted the costs of servicing the loan, property taxes and maintenance expenses.

Hence, one should not sniff at other income generators that pay 2 per cent or less. These are still higher than fixed deposit rates and these more affordable instruments, such as SSBs and endowment policies, have a place in each person's asset portfolio.

As they say, time is money so the earlier you diversify your asset pool and overcome inertia to consider these so-deemed not-so-sexy options, the better your bottom line will be in years to come.

It starts with keeping tabs on who's offering what.

Recently, I have cottoned on to this retro method. When I was younger, before the advent of the Internet, people kept files to keep track of bills, monthly statements and receipts.

So when I read the newspapers now, I have my scissors ready to cut out any advertisement or news article that is linked to returns higher than fixed deposits. Previously, the ads would have piqued my interest but I often forgot about the deals after I had put away the papers. Now, I cut out the ads and file them in a folder. Every week, I review the contents.

One example: I have kept the ad from this new insurer in town. I am now wondering if I should buy the three-year endowment it offers online that promises 2.02 per cent interest a year.

It is the shortest endowment tenure I know, and at an entry rate starting from just $1,000, compared with other policies I have and whose tenures are at least 10 years.

Growing a nest egg is of paramount importance, seeing that statistics show that one in two Singaporeans aged 65 now can expect to live to 85 and a third of the population to beyond 90.

Another cutting in my file points out that from next year, drivers can service their cars at a workshop of their choice and not worry about losing their warranty.

I am ready to tap this cheaper option but it remains to be seen if many people will take this route for habits are hard to change, even if it makes greater dollars and sense.

A version of this article appeared in the print edition of The Sunday Times on December 17, 2017, with the headline 'When fresh options are a good bet'. Print Edition | Subscribe