The average life expectancy for Singaporeans is 83.2 years, for year 2018. Singaporean males have to perform national services duties for 2 years, and if we were to include university studies, the average age of beginning work in society is 25 years of age. I would have mentioned earlier in my article, Investing from Age Zero, so for age 25 to 60, he has a good 40 years of investment horizon. Working backwards even more, if he had started even earlier (or his parents had given him a hand as a child), he would have a very good horizon of 65 years. Some of my readers have told me verbally that it is very hard to visualise without any figures or examples.
My Daughter’s Journey, from age 0 to 25
I started out my daughter’s savings journey in her CPF Special Account (assume 4% throughout, instead of 5% for the combined first $60,000 for SMRA) when she was very young. Assuming she had started off from birth, a $100 dollars monthly contribution (or $1,200 an annum), after 25 Years her savings account will have grown to $51,057.88 — of which $30,000.00 is the total of beginning balance plus deposits, and $21,057.88 is the total interest earnings.
This is what she would have attained at age 25.
Average Singaporean with 40 years investment timeframe
An average Singapore enters the workforce at age 25 after university education.
Assuming he has a 40 years timeframe and with all other conditions the same, a $100 dollars monthly contribution (or $1,200 an annum), after 40 Years his savings account will have grown to $116,501.28 — of which $48,000.00 is the total of beginning balance plus deposits, and $68,501.28 is the total interest earnings.
I have not included CPF contributions from his employment into account. This is what he would have attained at age 65.
Back to: My Daughter’s Journey, from age 25 to 65
We last left off where my daughter turns 25, the same age as the average Singapore earlier who enters the workforce at 25 and starts to have an interest in saving in his CPF. The latter starts off at zero, and the earlier at $51,057.88.
Fast forward to 40 years from now where my daughter is similarly age 65, after another 40 Years her savings account will have grown to $361,631.23 — of which $78,000.00 is the total of beginning balance plus deposits, and $283,631.23 is the total interest earnings.
At age 65, it is a comparison of $116,501.28 (for a 40 years timeframe) versus $361,631.23 (for a 65 years timeframe). A 25 years headstart means all the world — 3 times the resultant “fruits of labor”!
All of these work is done, just by committing a small amount of money consistently. In fact, it is applicable to any other forms of consistent savings and investments. You will find that over time, by comparing the pie charts, that your initial deposits is forming lesser and lesser of your overall wealth for this instrument.
This is in fact testament to the magic of Compounding Interest and my continued belief in why Investing early matters to everyone. There are various other scenarios which would be interesting to look at in my subsequent articles.
It doesn’t mean that 25 years is “too late” of an age to start or be invested. It is all relative, starting off at 25 is better off than the person who starts at 35, who is in turn better off than the person who starts at 40. The faster one starts, the better off one ends off the journey with.
Take control of yours and your children’s savings and investment journey in your CPF, and for that matter, any other investment instrument now.