There are so many financial products in the market – insurance, mortgage loans, shares, credit cards… and we are not even talking about the complicated ones that are only sold to accredited investors.
Some people may shun financial products due to a lacking of understanding; or perhaps they have heard of horror stories from friends about extra charges and fees levied on them for a product they apparently “bought” but had never used.
Are you one of them?
While you might be content with hiding your money under your pillow, there can be implications to these old-fashioned habits which might not work to your advantage.
Here are 4 essential financial products that you need in order to ensure your financial health is in good standing:
1) Savings That Can Last You 6 Months At Your Current Spending
Most of us might already have a savings account from young, but that doesn’t mean there’s savings inside.
If you’ve been living a hedonistic lifestyle where you spend on credit and survive paycheck-to-paycheck, perhaps it’s time to put your future in perspective.A good savings plan is essential in helping you achieve every important milestone in your life – from a new car to a new house, or even getting married.
You’ll also need to remember that the unexpected can throw you a curveball and there will come a point where you’ll be glad to have had some extra funds.
Always put aside at least 6 month’s worth of living expenses as your emergency savings, just in case.
You never know if you might be an unfortunate victim of a retrenchment exercise, or that a family member will need some temporary financial help to pay for medical bills.
2) Having Health Insurance For Adverse Circumstances
Given that Singapore is not a welfare state, we’ll need to be responsible for our own healthcare needs and expenses.
Let’s face it, our Medishield Life may not be adequate to cover all our medical expenses, especially if it involves any major surgery or long hospital stays.
It is thus essential that we get at least some form of health insurance to cover us as a hedge against adverse circumstances.
Not only will this benefit us, it will also relieve unnecessary financial burden on our family members should the unfortunate happen.
3) Having A Credit Card To Maximize Returns On Your Spending
You must be thinking… how is a credit card considered “essential”?
Yes, the possession of a credit card may at first glance, looks more like an ostentatious want than a need, but do you know that it serves other purposes as well, more than just being a convenient source of payment?In fact, when you go to a bank to take up a loan, one of the first information they’ll look for is your credit history. Having a credit card and having records of regular payments show financial institutions that you are financially responsible.
This will aid you greatly when the time comes for you to apply for a home loan, study loan or car loan from a bank.
4) Having Investments In An Index Fund
You might be an extreme conservationist when it comes to financial investment, and much prefer to keep your cash in a savings account or fixed deposit account.
Well, I guess it’s not news to you that our interest payments from these types of account hardly help to preserve the value of our money.In order to preserve the value of your money and assets, you’ll need to invest in something with returns that can beat inflation. One of the least risky investment is to put your money in an index fund.
An index fund is great if you are clueless about stock-picking or reading the financial statements of companies.
Because it is made up of a basket of blue-chip companies that are from different sectors, it is a good investment option which is diversified to begin with.