Avoid overspending, keep your credit clean
Singles enjoy more freedom when it comes to spending and investing, but there can be more challenges in managing money alone.
Media executive Ryan Lee, 37, learnt the hard way that contra trading on stocks can cause painful losses.
An investment gamble went south for Mr Lee about three years ago, costing him some $20,000 and causing him to rethink his approach to money matters.
As an investment novice then, he got hooked on contra trading, which allowed him to buy stocks from brokerages without having to put up his own money or other collateral.
After scrambling to pay off the debt, he's now sworn off contra trading, though the single still has a penchant for investments with higher risks, like penny stocks.
"Penny stocks are so cheap, they allow me to buy in large volumes, get in and get out fast, especially since such stocks are usually very actively traded in the market," Mr Lee said.
The search for higher returns was also what prompted 27-year-old full-time master's student Joseph Zhou to try his hand at stocks, which held the promise of better returns than savings deposits.
He bought some stocks upon starting work after graduation as he found it was relatively easy to invest in equities and they were a liquid asset.
Describing himself as risk-averse, he invested only in blue chips and limited the red ink by selling stocks when they incurred a loss of 10 per cent on the buy-in price.
"I was putting in three-fifths of my salary in stocks," said Mr Zhou, who has a girlfriend.
"But if I'm married, I will not consider investing more than one-third of my salary in stocks," he said.
Independent wealth planner and author Andrea Kennedy notes that singles do not seem to adopt a long-term view of investing.
Ms Kennedy, who interviewed 20 Singaporean women in their 20s recently during the course of her work, found that the women have not thought beyond wedding plans and buying their marital home.
"A lot of these young women don't think about retirement planning or investing in asset classes other than property," she said.
"But... they should do it in their 20s or 30s because there's a longer time horizon to smooth out the volatility in the markets and let dividends compound over time."
Being a single when it comes to growing your wealth can be a double-edged sword.
On the one hand, you can afford to take on more risks in exchange for hopefully higher returns, knowing that you will not be jeopardising your spouse's hard-earned savings or your children's trust fund.
But on the other hand, you will not be able to fall back on a partner or child for support.
Worse still, if your source of stable income is suddenly gone and you have ageing parents to look after, you could find yourself in a sticky spot.
The Sunday Times finds out what singles should take note of when growing their nest eggs.
Have an emergency savings fund
As the adage goes, it's wise to save for a rainy day - and it's even more crucial for singles.
Financial planners say there's no magic number or one-size-fits-all approach on how much to save, as much depends on your spending habit and level of wealth.
Generally, you should have between three and six months of your income set aside in case you suddenly lose your job or are unable to work owing to an illness or accident.
If you are in your 20s, try to save at least 10 per cent of your income a month, and let that proportion rise to perhaps 40 per cent as you advance through the years and in your career.
Aviva Singapore director of product and marketing Daniel Lum said it's important to avoid overspending as all expenses have to be borne by you.
You should also focus on investment and protection tools that concentrate on living benefits, or payouts when you are still alive.
"This is important as you don't have a spouse or partner's income to fall back on, so you need to ensure you're able to pay the bills and daily expenses if those (negative) scenarios were to happen," said Mr Lum.
Income protection plans, or insurance plans that pay a certain amount of your current salary if you can't work due to illness or disability, are now quite common in the market, though premiums may not be cheap.
Ms Jenny Teo, the head of business centre at NTUC Income, said another important consideration for singles is to protect their credit ratings by making loan payments in full and on time.
This is to ensure that they can secure credit and loan facilities as "financial institutions offering such facilities will not be able to take into consideration spouses' additional income".
Prepare for health-care,retirement needs
With rising health-care costs, you don't want to be saddled by hefty medical bills, so make sure you have enough insurance coverage.
While the Government is making plans to cover all under the national health insurance scheme MediShield Life, MediShield now provides coverage only for large B2- and C-class hospitalisation bills in public hospitals.
You can consider upgrading to Integrated Shield plans that offer other perks such as higher payouts and being able to make claims for stays in higher-class wards or private hospitals.
Besides hospitalisation plans, you can also look into having insurance plans that offer coverage for disability or critical illnesses.
Prudential Singapore chief marketing officer David Ng said you should consider the health-care needs of your dependants.
"If the individual's ageing parents or even siblings are solely dependent on him, he should have life insurance.
"More importantly, he must also plan for the health-care needs of his parents by taking up hospitalisation plans for them."
Don't wait till you are in your twilight years to ensure that you are well provided for at retirement, said Great Eastern chief product officer Lee Swee Kiang.
"When it comes to retirement planning, they should start early, preferably from the onset of their 20s when they start working.
"Many singles are unaware of how much they even need for retirement, which is why they do not feel the urgency to start as early as possible," said Mr Lee.
Check risk appetite, widen asset class horizon
Savings deposits are relatively safe, though the paltry rates offered by financial institutions in the current low interest environment mean you may not get much returns on your money.
But before you go hunting for assets offering the highest returns, you need to realise that the risks will be higher.
You should therefore assess your risk tolerance, educate yourself on the various financial instruments out there and set your investment objective.
AIA Singapore chief marketing officer Ho Lee Yen noted: "There is a wide range of investment products for customers to choose from, such as investment-linked insurance policies, bonds, shares, real estate investment trusts.
"That said, it is important to exercise prudence to choose one that is well suited because it is not a one-size-fits-all solution."
Tokio Marine Life Insurance Singapore chief executive Lance Tay said diversification of assets is essential, taking into account both the short- and long-term investment horizons.
"While illiquid investments might seem attractive, one must bear in mind that illiquid assets cannot be sold quickly because of a lack of ready and willing investors available to purchase the asset at any one time, which is critical during an emergency," he said.
He pointed out that investment asset classes for singles should ideally generate some kind of income during their ownership, thus increasing their real value over time.
This is why he doesn't recommend that singles buy into gold, even though it is an effective hedge against inflation, as it is a so-called non-productive asset that does not provide a stream of dividends.
Mr Tay said property is a good choice for singles younger than 40, as it will generate rental income and is an appreciating asset that may result in a huge one-time payoff after its sale.
Financial planners also urge those who are divorced or widowed to avoid making hasty or risky investment decisions, as they may suffer a fall in living standards without the spouse's income support.
Belts will likely have to be tightened, while borrowing eligibility may be reduced.
Ms Kennedy, who also wrote the book Own Your Financial Freedom: Money, Women, Marriage and Divorce, said it is best to take the time to work out your sums.
"Make peace with the situation, look at how you are using your money, check what's your budget, if you will be getting alimony or any lump-sum payment," she advised.
"Talk to a financial planner, or perhaps someone who's been divorced before and see how you should proceed."