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Achieve financial wellness with your first 3 pay cheques

Achieve financial wellness with your first 3 pay cheques

  • 29 September 2023
  • By OCBC Singapore
  • 20 mins read

Congratulations on landing your first job! Now that you have a steady income, find out how you can make the most out of your first three pay cheques with this article:

Starting your first full-time job can be a thrilling and life-changing milestone. As a first jobber, what will you do with your first few pay cheques? Treat yourself to an expensive meal? Get your first Chanel bag or Prada wallet?

Being able to handle your money responsibly, alongside your newfound financial independence, is critical in building a solid foundation for yourself, and most importantly, overcoming downturns in life.

Do you invest more than you save?

In 2022, OCBC surveyed Singaporeans aged 21 to 29 on key personal finance metrics, including saving, investing and managing debt (Figure 1). While the OCBC Financial Wellness Index survey showed an impressive 86% to have started investing, more effort is needed to encourage saving among this group. Furthermore, an average of only 49.5% have put money aside towards building an emergency fund.

Figure 1: Young Singaporeans aged 21 to 29 prioritise investing over saving

Figure 1: Young Singaporeans aged 21 to 29 prioritise investing over saving

Source: OCBC Financial Wellness Index 2022

These are important gaps to address as saving is a low-risk way of growing your money. Having sufficient money can also provide peace of mind in those moments when you need to bear the cost of unforeseen events. Rather than liquidating your investments (which may lead to losses), you instead pay through your savings.

An emergency fund, as the name suggests, is having sufficient cash set aside for unexpected life events, such as a medical emergency or the financial burden of a sudden job loss. This is a separate pool of money from your savings. Not having an emergency fund can lead you into debt as you may resort to interest-bearing personal loans or credit cards to settle the payments.

How can young Singaporeans like yourself set aside enough money for an emergency? Let us discover and explore how you can use your first three pay cheques to make smart financial decisions when the time comes.

First pay cheque: Build an emergency fund

Your first pay cheque is certainly an exciting moment, but it is also an important moment to strike a balance by making smart financial decisions. Simply put, it is perfectly fine to reward yourself with an expensive treat, but the key here is to not think short term but plan for the longer term. Ensure that you budget your purchases in a sustainable way to avoid diminishing your money at a rate faster than your incoming pay cheques.

A quick and easy way to start is by adopting the golden 50-30-20 rule, which divides your pay cheque into the following:

  • 50%: Daily living expenses
  • 30%: Entertainment and miscellaneous
  • 20%: Personal savings and investment goals

Specifically on savings and investments, you can take the first step in assigning 20% of your first pay cheque towards building an emergency fund. Ideally, grow this fund to cover at least three to six months of your living expenses, in a bid to weather through unexpected downturns.

Rather than simply saving through a regular savings account, explore the use of a high-yield savings account. The 360 Account is a fantastic choice as it allows you to earn up to 4.65% per annum on your first S$100,000 when you credit your salary¹, save² and spend³. There is also the possibility of earning an extra 3% when you purchase eligible insurance and investment products with OCBC Bank.

1 Credit salary of at least S$1,800 through GIRO

2 Increase average daily balance by at least S$500 each month

3 Charge at least S$500 to selected OCBC Credit Cards each month

Second pay cheque: Manage your risks

Next, let’s talk about how you can use your second pay cheque to prepare for any curveballs that life may throw at you.

As we all know, life is unpredictable. Unexpected events can cause a significant blow to your retirement plans. For instance, you were planning to work into your 70s maybe, but a work injury caused you to be bedridden instead. Not only have you lost your source of income, but you also did not get a chance to build a nest egg like you had planned. In addition, there are now massive hospital bills to incur.

It is true when we say we are unable to foresee the future, but one thing we can do is to prepare ourselves for such events.

Think about safeguarding yourself and insuring your loved ones from unforeseen financial obligations. With so many different types of insurance plans out there and a limited budget, how can you get the right coverage and what should you prioritise?

Before diving into the different insurance policies, it is essential to review your existing policies and identify any gaps that may exist.

If you are a Singaporean or Permanent Resident, you are already covered under MediShield Life, which offers basic hospitalisation and surgery coverage. For additional coverage, consider upgrading your MediShield Life plan to Integrated Shield Plans offered by private health insurers. These plans can even be funded using MediSave. Depending on the plan you select, you can then get coverage for higher ward classes, claims and more.

As a first jobber, however, your priorities may be different. While death coverage may not be at the top of your list, you may want to allocate more to critical illness (CI). Just think about it, if any unfortunate event were to happen, you would want to get treated promptly. Being able to take time off work to focus on making a full recovery can make a difference. And this is where CI coverage can give you this option.

Depending on your plan, CI coverage may include:

  • Income replacement
  • Any remaining out-of-pocket costs
  • Payouts for trial of experimental drugs

You may consider the OCBC Great Term Guard (Figure 2), a term insurance plan that provides coverage against death, terminal illness, total & permanent disability (TPD) as well as late-stage CI.

The protection covered under the OCBC Great Term Guard includes:

  • Critical illness (includes 53 CI)
  • Death or terminal Illness
  • Total & permanent disability

Figure 2: OCBC Great Term Guard offers extensive protection with varied coverage to best meet one’s needs

Figure 2: OCBC Great Term Guard offers extensive protection with varied coverage to best meet one’s needs

Source: OCBC Wealth Management

Do not think of insurance as a “waste of money”. The OCBC Great Term Guard distinguishes itself from the other comparable policies on the market by offering a complete refund of premiums if no claims are made at the age of 65. Prioritise what is important here, which is your health. Start protecting yourself today.

Third pay cheque: Start investing

Now, a question you may have is, “How can I grow my wealth?”.

Investing is a powerful tool for building long-term wealth, but it can also be intimidating for first-time investors. Technical jargon, alongside the vast variety of investment choices, serve as reasons for resistance to investing. Are you guilty of such procrastination?

A savings account alone is not enough to reach retirement. Rather savings, coupled with investing, help to build your future wealth, beat inflation and preserve your purchasing power.

With the power of compounding i.e. multiplying effect (Figure 3), the earlier you start investing, the longer the time horizon you have for your investments to grow.

Figure 3: How to grow your money faster with the power of compounding

Figure 3: How to grow your money faster with the power of compounding

Source: OCBC Wealth Management

To kickstart your investment journey, consider using the OCBC RoboInvest platform. Even as a first-time investor, the tested and proven algorithm technology can help you manage your investments and make intelligent and personalised investing suggestions.

With 38 portfolios across 7 markets, the diversified portfolios are designed to reduce risk across different asset classes and investment themes. This ensures that every investor, including yourself, can find an investment that is tailored to your unique risk appetite, needs and wants. Just perfect for first-time investors!

With as little as US$100 per month, here is how the OCBC RoboInvest platform can help you:

  • User-friendly and convenient
  • Highly interactive
  • Hassle-free optimisation

Moving forward, you may want to consider unit trusts too as they give you the flexibility to invest in multiple markets and industries starting from just S$100/month. Aside from achieving portfolio diversification with the top fund ideas curated by experienced OCBC investment experts, you can also get your portfolios taken care of by professional fund managers.

Remember, investing is important at any age and it is never too late to become an investor.

Good job on staying till the end of this article #NewAchievementUnlocked. Feel ready to start? Visit our website or approach your relationship manager to find out more.