Shulin Lee · Transcript · · Updated
Money Rules That Will Change Your Life and Give You Financial Freedom – Transcript
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- Chris advises using cash first for investments rather than touching CPF ordinary and special accounts because they offer guaranteed interest rates higher than bank accounts.
- For a simple investment portfolio, Chris suggests buying a single exchange-traded fund that tracks the entire global stock market.
- Chris explains that building a strong financial planning foundation through budgeting, surpluses, and emergency funds helps investors stay rich.
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Now even the oracle of Omaha cannot beat the market. What makes us think that we are so good to pick the stocks and can consistently beat the market year after year? >> Have you ever invested your CPF money? >> Not a single scent. Never.
>> I think most Singaporeans treat CPF like a tax, like the government taking the money from you and you won't see the money until you turn 55. Like why should I put more money in? >> Your special account can earn you four to 5% interest. >> Wow, that's a lot. And that's guaranteed. how it's a sin to invest from a special account.
>> It seems like it's been the best kept secret. I can't believe that I'm only hearing about it now. >> If I knew about this when I was 25 years old, that $27,000 I put into the country club and I lost every single scent. I would have actually top up my special account.
Shulin, you have this last chance to top up your special account because at some point in time, you cannot top up anymore. Now 1 M65 is no longer invoked. We are talking now about 4 M65 >> in CPF. in CPA.
>> If you were to build a simple investment portfolio for your average Singaporean, what would it look like? >> Just five. >> Before we start, we would really appreciate it if you could like and subscribe on YouTube or Spotify or Apple Podcasts. And if you find this valuable, please consider giving us five stars because it would mean that we can pass this message on to many more people.
Thank you for tuning in and I hope you enjoy this episode. Hi and welcome back to the real reason. So, in the last episode, Chris shared with us why most financial advice is designed to make you feel anxious, not wealthy. And this week, we're going to just go back to basics. What to do with investing? And actually, we're going to start off with something very basic for Singaporeans.
It's your CPF. What to do with your CPF. So, let's dive right in. Welcome back, Chris. >> Thank you for having me be back. >> Yes. So, in the last episode, we talked about financial gurus, influencers, scams. And this week, we want to go back to basics, what actually to do with your money. So, I'm going to ask you, have you ever invested your CPF money?
>> Not a single scent. Never. I have never invested my CPF money. I mean, when I was much younger, I don't have a lot of CPF money to invest uh uh from, right? Or I don't have a lot of CPF money to invest. [gasps] Well, why? Because a lot of us we use our CPF money from our ordinary account to pay for the mortgage of our house. And then when I had more money in my CPF ordinary account, I decided not to use it because it doesn't make sense to use money from your CPF to
invest if you have got cash. You always start investing from a lower source of return, right? And cash obviously gives you a lower source of return because your cash is sitting in a bank account. Your ordinary account gives you at least 2.5%. your special account. Don't even think about investing your special account. It's a sin to invest from your special account.
>> Wow. Wow. Wow. Okay. So, there are a lot of terms here. So, you manage 1.7 billion in investments with Providence. >> Now, 1.8. >> Okay. Sorry, my bad. 1.8 billion. Thank you. And and soon to be two billion. So, is that the advice that you give to everyone? Do not touch your CPF money.
>> Most of the time, yes. I mean, out of the 1.8 8 billion that we manage uh only about 30 million is from CPF the rest of the 1.8 8 billion is actually from our client's cash. >> Right?
>> Why do I say that? Right? So, as I was saying that your ordinary account and special account gives you an interest that is higher than your bank interest. So, if you're going to invest, you start using cash first to invest. Don't use your OA and your SA.
>> So, Chris, I think most Singaporeans treat CPF like a tax, like the government taking the money from you, and you won't see the money until you turn 55. So that's why people look at CPF as like maybe why should I put more money in?
>> I mean it's definitely not a tax. You are actually not paying the government. It's not going into the government's account. You are actually putting it into your own account. Right? Of course if you are below 55 years old you got an ordinary account. You got a special account and you got a Medisafe account.
Right? and we contribute together with our employers about 37% of our income into the account. Each account earns you interest. The ordinary account earns you 2.5% to 3.5% interest. Your special account can earn you four to 5% interest.
>> Wow, that's a lot. >> Yeah. And your medicave can potentially also earn you four to 5% interest. >> And that's guaranteed. >> Yeah. At this moment, it is guaranteed, right? You're getting minimally that kind of interest. And then it grows and grows and grows. And at about 55 years old, you can take a portion out. The rest of it will go into a newly form account when you turn 55, which is retirement account.
>> That money in the retirement account will roll for 10 years growing between 4 to 6%. >> Wow. >> Per year interest. And then as early as 65 years old, you can have a annot payout for life. So it is your money. It is not going into the government's coffer. It will come back to you one day.
>> Right? Okay. So that's the ordinary account which has the most amount of money. >> I would say receives from your contribution yet it most of your contribution goes into your ordinary account. There are four main purposes you can use the monies in the ordinary account for. Well firstly of course to pay for the mortgage. Secondly, you can lend it to your children to pay their fees if they study in the five local
uni, five local police or a diploma program from it. Oh, I didn't any of the two colleges of arts lassal and Nanya Academy of Fine Arts. >> Wow. >> But of course, you're lending one year after they leave the program whether they pass or not, your children will have to pay it back into your account by installment, right? So, that's education. Of course, you can buy savings and investments insurance using
your OA and of course you can invest under the CPA investment scheme with money in the O8. Right? So that's the ordinary account, >> right? And do you recommend people taking money from the ordinary account to invest?
>> I would say that if you have cash, use your cash first. I think the biggest mistake people make is that they think that money's in the ordinary account or monies in general uh in or monies in the CPF accounts in general that's not my money and because I can't touch it anyway I anyhow invest right >> I don't care what I buy because anyway I cannot touch it so I'll just invest
>> that's the mindset >> yeah but it's 37% of your income you know >> that's your own money right going into the CPF accounts, right? And because you are getting a pretty good interest rate, higher than your bank interest rate, again, I'm saying that if you want to invest, see whether you have cash to invest first, then use your cash. Don't touch your CPF as a start. And if you can, don't touch your CPF. If cash is
enough for you to invest to reach your goal, then actually use your CPF like a safety net. You don't have to touch it at all. it still, you know, gives you that pretty good interest for that amount of risk or for the low risk that you only need to take. So, leave your CPF alone if you have cash.
>> And because you said special account has a higher interest compared to ordinary account. >> Okay. Sorry if I sound like a complete idiot. Okay. I want to know this. Can I transfer my money from ordinary account to special account to enjoy the interest?
>> Yes, you can. Right. So, your special account do that. >> Yes, they should. Okay. But there is a limit. >> Okay. >> Right. The limit is that year's full retirement sum. >> Okay. And this year 2026 full retirement sum is $220,400.
>> Wow. You can remember everything. >> Yeah. Because I I talk about it all the time. Right. So, if you go and check your special account and you don't have this amount yet, >> you can top up into your special account up to this limit. >> Wow.
>> There are two ways to top up. >> You can use cash to top up >> or you can transfer money from your ordinary account to your special account. >> Wow. But if I use my cash, I put it into my special account. The only time I can withdraw is when I hit 55.
>> Yeah. That's the first uh time you can withdraw. Now of course people will be saying like but there's no liquidity you know I put in I I have to wait until 55 years old. But look shin if you buy an endowment plan using you know uh from an insurance company you are locked up for 20 30 years as well.
>> Mhm. >> If you are investing for the long term and you should be investing for the long term you are also not supposed to touch the money for the next 20 to 30 years. Right. So, if you don't like market risk, then you should actually put in money into your special account regularly, whatever amount you can afford, $100, $500, $1,000 a month if you can do it. So, instead of buying an insurance endowment
plan >> or even putting it in the an FD, >> yeah, just regularly put it in special account, right? Of course, a fixed deposit you have full liquidity. you can take out anytime. The special account you can't, >> but that's the whole purpose for saving towards your retirement, isn't it?