049 A Youngster with a Financial Goal - A lesson

A fellow planner shared a fantastic with me today. An unknown stranger texts him to seek financial advice. He got the planner's name through online searching.

It appears that the stranger is a youngster by the age of 22. He works in Singapore with no contribution to CPF (Singapore version of EPF). He has a goal - to saved RM100k in ten years time.

The planner calculated the monthly investment amount to be RM1300 - with assumption of rate of return of 9% p.a. He is OK with the amount. With SGD exchanging for RM2.60, RM1300 is equivalent to SGD$500 only.

How nice to see this youngster has a financial goal and is willing to save to achieve it. Youngster nowadays normally spent first save later - normally save none. If I had started my investment like him, maybe my financial position will be much much better.

I invite all friends to save early. The earlier we started our investment program, the lesser amount needed, the faster we can achieve our goal. Below is a table that shows the projected value of a RM500 investment in different rate of returns and different length of years.

		Projected Value of Saving RM500
		Years
		5	10	15	20	25	30
Rate of return	3%	32,810	70,847	114,941	166,059	225,318	294,016
	5%	34,811	79,241	135,945	208,316	300,681	418,565
	7%	36,920	88,702	161,328	263,191	406,059	606,438
	9%	39,140	99,362	192,020	334,587	553,944	891,451

We can see if we saved in lower yield instrument, say 3% FD, the future amount is lesser than than those higher yield instrument. The difference for lower span of years may look small but as the years drag, the difference becomes bigger and bigger - compare value at 30 years.

As inflation gets things more and more expensive, we have to invest to grow our money. And to do that, we do not want investors to participate in any speculative instruments or invest with a speculative behavior. We want investors to focus on his jobs while leaving the investment to professional managers.

We recommend pool of funds or stocks that has track records - managed professionally with decent returns.