Why Do We Need To Invest?

It is vitally important in this current day and age for all of us to begin taking

control of our financial situation and start planning for our future, and the futures of our children.

We can no longer rely on the government to hand out an aged pension once we retire. We cannot take for granted that at the end of our working life we will be taken care of financially. Most of us have never sat down and even considered the ramifications of why the compulsory super was introduced and for many of us it is a matter of too little too late. Even for the young women in our society who have a full working life ahead of them, they still cannot rest assured of a comfortable retirement.

Why is this? It is because that unfortunately even with contributions at the current level of less than 10%, someone on an average wage who works continually for 30 years, is still going to find themselves trying to survive on an income equivalent to less than $20,000,00 per annum in today's dollars.

Since young, we have always been asked by our parents on the importance of saving our money in the bank. However, is this the correct way going forward especially in times where the costs of food, clothing, transportation, education, healthcare and housing are rising at such rapid pace?

Let us first take a look at the current savings account rates of the 3 major local banks in Singapore and the average savings account rate over the years.

http://i285.photobucket.com/albums/ll74/gohyc2003/IIC/Whydoweinvestandhow2.png

As you can see, the savings account rate has remains constantly near the 0.2% mark since 2003 and it had recently dropped below that level, hitting an all time low of just 0.17% as of June 2009.

The Singapore Government is obliged to pay the holders of SGS and T-bills a fixed sum of money on the maturity date of the securities. When you invest in SGS and T-bills, you are lending your money to the Singapore Government in exchange for interest payments. Although SGS cannot be cashed in with the Singapore Government before their maturity dates, investors can sell them at the prevailing market prices on the secondary market to other investors like banks.

Investors who wish to invest in corporate bonds are to seek advice from their banks or insurance company. Please be aware of the risk and make sure you know what you are investing in. Generally, bonds issued by local companies like Temasek and SingTel is much safer than investing in those issued by foreign companies.

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Why Do We Need To Invest?

By: Sanjeev Singh

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