On Money and Me, Michelle Martin speaks with Ms Chuin Ting Weber, Chief Executive and Chief Investment Officer at MoneyOwl, a joint venture between NTUC Enterprise and Providend, to find out more about how they are helping Singaporean families make better financial decisions so they can live well and retire well.

Michelle Martin: Singaporeans have been worried about money even before the pandemic. Has the pandemic made those worries even greater?

Chuin Ting Weber: Money is a common thread that runs through so many aspects of our lives. It is about how [money] is so personal, how we want it in our lives and sometimes, there is a lack of money, or that we don't know how to manage or optimise it. We also think about how we are going to retire in the future when we no longer earn money. So, I think this has always been the bewildering journey and financial advisors have always been trying to help people to get on top of this. But of course, the pandemic has underscored some of these gaps in Singaporeans’ financial management.

MM: I was reading four in 10 Singaporeans constantly worry about their finances so I can imagine that with the recession and wage cuts, or for some even losing their jobs, has made the situation worse. What were some of the gaps in good money habits that you’ve noticed even before the pandemic?

CTW: Singapore is a financial hub in that there are many financial innovations and products over the past five to 10 years. That is reflective of the interests in the markets about products. But that could be problematic as well because when we talk about financial management, many people immediately [associate it with] savings products, investment products or insurance policies, and is how the financial industry has been going about providing financial advice.

A better habit is not to be addicted to chasing the best products, but to view financial management comprehensively. Do a comprehensive plan and take actions in the right order. Financial management starts first with a foundation of good financial health. Before we make any investments, we need to set a budget, keep our expenses low, control our debt levels and save towards an emergency fund.

Without good financial health, you cannot run the marathon of investing.

An OCBC survey in June showed two in 3 Singaporeans do not have [at least] 6 months-worth of savings for expenses set aside or to tide them over a crisis. Imagine if you had started investing before setting aside this emergency fund and something happened to your job, you might be forced to liquidate your investments. If that happens when the markets are down, you’ll make a loss and there goes your investment plans. That is why we need to view things holistically.

Secondly, alongside financial health, you need to protect your income against life risks such as death, disability or medical crisis. We need to recognise that your most important financial asset is not your house or investments, but it is yourself and your ability to generate income to save and invest. Singaporeans spend a lot of money on insurance yet they are still under protected, probably due to unsuitable or expensive insurance products which are unnecessary.

Buy as much protection as you need, but pay as little as you can.

MM: What would be a good benchmark to have for an emergency fund?

CTW: We recommend 6 months, and the absolute minimum is 3 [months]. Sometimes, it depends on your situation, which is why financial planning is very personal. For instance, if you have a very stable and high earning job, and your expenses are [relatively] low, you could save about 3 or 4 months for those expenses. But if your income is more volatile, you would want to save a little more. Generally, 6 months is good. We think that anything more than 12 [months] is excessive because you may not be able to reach your goals by earning through [interest rates] from banks since the rates now are almost zero.

MM: What is the difference between term insurance and other types of insurance?

CTW: The concept of insurance is very important. Insurance is primarily for protection, so we must recognise what we're protecting against. The most important thing to protect is against the loss of income – [should an unfortunate event happen to you], your income takes a hit and your family depends on it, they would suffer financially besides emotionally from losing you. If you get hit by a medical crisis which requires you to take a break, or a disability which causes you to not be able to work, you need to ensure you can pay your medical bills as well as to supplement or replace your income. As we talk about income replacement, you only need that insurance only insofar as you have an income to protect. Which is why term insurance that covers you until your retirement age or until your last dependent becomes independent should suffice, you don't need to protect yourself for your whole life. That is the concept of insurance for protection only.

The premiums for term insurance are actually more affordable compared to a whole life insurance. With whole life insurance, you're actually only paying to buy the protection partially while another portion is paid for the insurance company to invest for you. Sometimes there is a misconception that insurance is 2-in-1 but it is not the best way to save even if you have a low risk appetite. There are many other instruments that can give you better returns.

MM: For those who think that they are one of those ‘four in 10 Singaporeans who are constantly worrying about finances’ or not having a job, what can they do right now given this economic environment? Where is a good place to start?

CTW: If you [think that you] don’t have enough right now, you should do a financial health check. What do you check on - (1) Do you have 6 months of emergency funds? (2) Your debt levels.

A practical way to start is to take your income minus expenses. Take a hard look at your income. Is there anything you can do to make sure that you are able to keep your job for as long as possible to continue your income? If you don’t think you can, then will you be able to take on a second [job] to supplement your income?

As for expenses, take a good look at your budget. A crisis is a good time to take a hard look at what you really need and what you don't need, especially among your variable expenses. You could restructure some of your insurance, however take caution not to lose coverage. Instead, look into whether there is a cheaper options for instance, you can consider sending your children to group tuition instead of private one-to-one tuition.

People might be daunted by the idea of heading to a financial planner if they don't feel that they're financially healthy, but actually you can think about it like visiting a (free) clinic. It's a great place to start to get your financial health in order, do that check up and get some great advice.

Listen to the full podcast to find out if it is recommended to invest money in your CPF and how to do it correctly:

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For more, tune in to Your Money with Michelle Martin on weekdays from 9AM to 12NOON.
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This interview was broadcasted on MONEY FM 89.3 on 2 October 2020.

Disclaimer: All analyses, opinions from interviews, recommendations and other information broadcasted, podcasted, published or printed herein are for general information. You should not rely solely on the said information and are advised to seek independent financial advice from your own financial or investment consultant prior to making any investment decisions. Before acting on the information you hear or read on MONEY FM 89.3, remember to consider if it is suitable for your own investment objectives and financial situation. SPH Radio does not accept any liability for any loss whatsoever arising from any use of the information broadcasted, podcasted, published or printed herein.

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