Dec 29, 2016

Save money where it counts, says expert

Save money where it counts, says expert

PETALING JAYA: It is one thing to save money but it is just as important to save it in the right place, says a financial planner amidst concerns over the saving strategy of Employees Provident Fund (EPF) contributors.

Speaking to FMT, StandardFA’s director of practice and advisory management, Lee Khee Chuan, said many people made the mistake of saving money in a new investment-linked insurance scheme even when they already had sufficient medical and life insurance coverage.

“If you already have a medical and life insurance policy, and you are looking to keep money aside for the future,” he said, “it would be better to put it into a unit trust fund” because it would go directly towards investments.

According to him, only a percentage of the money put into investment-linked insurance policies would go towards investments, at least until the seventh year of contribution.

Lee was commenting on a news report quoting Kuala Lumpur EPF branch Retirement Advisory Service officer Nornisah Mohd Yusof as saying many contributors would have used up their EPF savings three to five years after their retirement.

“With the present economic situation and rising cost of living,” Lee said, “we have to learn to adjust our spending habits.”

For a start, he said, people should set aside money for retirement on top of their EPF contributions. They should also save for rainy days, he added.

He said one should consult a licensed financial planner to determine how much one should set aside. “For your retirement, the amount depends on many factors, including your salary, where you live and the lifestyle you lead.”

As for saving for emergencies, he said a rule of thumb was to set aside the equivalent of three to six months’ salary.

Elaborating on the need to adjust to current conditions, Lee said there were several basic things people could do to stretch their ringgit.

“A good first step would be to draw up a budget and draw a line between your needs and wants. From there, scale down on things which are not essential and opt for cheaper alternatives. Do compare prices to get the best possible deal.”

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