Webinar: Starting your CPF Millionaire journey early

During this session, Sheng Shi Chiam, Personal Finance Lead of Endowus, and Dinesh Dayani, Co-Founder of Dollar & Sense will share their thoughts, insights and personal journeys around CPF investing and becoming a CPF millionaire.

0:00 Introduction

3:21 Thoughts and journeys on why you should maximize your CPF

7:27 The importance of understanding how CPF works

8:43 Why we are conditioned to ignore our CPF

10:10 CPF management, considerations and goals

15:19 Beyond growing your CPF and being a CPF millionaire

16:05 Making your child a CPF millionaire and maximizing your family's CPF wealth

19:47 CPF Hacks: CPF cash top-ups, transfers and property refund

24:51 Key takeaways for growing your CPF wealth

30:51 QnA: ?How might you propose one to look at the OA, how much to allocate to property and how much to investments?

35:02 Final insights

Excerpts from the Webinar

We are conditioned to ignore our CPF (8:43)

Sheng Shi: We are conditioned not to care about our CPF. For example, you are getting paid $3000 for your first job but when the paycheck comes you only receive $2400. Hence, on day one you are already conditioned not to consider your CPF monies. The Singapore government will squirrel away the money once we start working, which we don't get to see. What I realised when I first started working was that I treated the $2400 a lot more importantly than the $600 that had been siphoned away from me. It is a natural feeling to ignore and not manage our CPF contribution actively because we see the $2400 paid to us but not the remaining balance.

It is very similar to the pay ourselves first concept, where we are supposed to transfer a sum of money that we're supposed to save and invest, and spend the rest of it. The government has already implemented something like this for us in the form of CPF. Therefore, we have this idea that CPF money is not our money and that we can only withdraw it at 55 years old.

Making your child a CPF millionaire (16:05)

Dinesh: When I had my first child I was already thinking of CPF hacks for him, so I began writing this article for Dollar & Senses where if you contribute $400 a month into your newborn's S.A. account for 21 years when the child reaches 65 years old, he will automatically have 1 million dollars in CPF monies. He will have much more than a million, once he begins contributing on his own. That is the power of compound interest, after 65 years of compounding he will be a millionaire. Personally though, I don't think anyone or everyone takes that kind of extreme approach to maximizing CPF. When the government opens your child's CPF account you should start topping up their M.A. account, which you can then start paying for medishield life premiums and even private integrated policy plans.

QnA: How might you propose one to look at the OA, how much to allocate to property and how much to investments? (30:51)

Sheng Shi: Personally, I look at property investment as an unnecessary expense that I need to have. My outlook makes me more measured in how much I want to spend for property. Therefore, I don't have to hold too much in property.

Saving up my CPF for property is something that I can plan over a longer term. This gives me a leeway of around two years to accumulate my CPF OA monies before I make that commitment with my partner. That being said, I currently invest all my CPF OA for now with Endowus, and don't do any OA to SA transfers. Once I make that commitment with my partner, to buy a BTO or even a resale flat, I will begin saving the money.

Two key takeaways from this is: 1) you need to be able to size up your expenses from a two to three year perspective because if you keep things open-ended with your partner with your property purchase then you are more likely to hoard cash in your OA and 2) have that awkward conversation with your partner because it is important to be on the same page on property and financial matters.

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