Back in your 20s, places where you can invest your money didn't seem as accessibleprobably because you felt that what you had wasn't enough, or maybe you were intimidated by the bureacracy of large banks when it came to growing your money.


Good thing that there are now more savings and investment vehicles to choose from, each more customizable than the next. Plus, you're now more certain about what you want to do with life, leading you to focus on your priorities and how to finance them. And now that you're more keen on making proper decisions, you may want to streamline how you save and grow your hard-earned money.

We reached out to Philam Life Head of Products Ten Paras and Product Marketing Manager Jerome Go to find out what you need to know about investing and/or saving your cash at this point in your life: Should you keep saving money even if you already have an emergency fund? Why or why not?

Philam Life: Operative word here is ‘if.’ Assuming the investor already has an emergency fund (three to six months depending on the risk profile or life stage), my answer would be NO. Savings puts a drag on the performance on the investor’s overall portfolio return. That money can be placed in a much better investment asset that could give better risk-adjusted return.

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FN: If yes, what's the ideal amount/proportion of cash that you need to keep in your savings account?

PL: If we are talking about [saving for an] emergency fund here, it would depend on two things: risk profile and life stage. The more conservative the risk-profile of the client, the higher the amount she should have on her emergency funds. Rule of Thumb—six months for conservative; three months for aggressive.

FN: Where is the best place to keep your savings, emergency fund and why?

PL: First of all, an investor’s emergency fund should not be mixed with his 'regular expenses fund.' Second (something experts are not saying enough), emergency funds should be deposited in a bank but [should not be as] accessible. This is to make it difficult when you want to ‘dip’ into it for the wrong reason.

My common suggestions are local branch of an international bank and ‘Saving Banks’ of large Uni Banks (still part of a large conglomerate, hence still very stable). If they are not comfortable with the first suggestion, they could instead place it in a short-term government bond (two years to maturity). It can easily be traded (liquid), it’s safer than banks, and provides higher returns.


FN: After creating an emergency fund, what would be the next best financial asset to buy?

PL: Most of the time, experts would recommend to clients to invest in a mutual fund or to buy direct stocks of Blue Chip companies right after establishing his emergency fund. [Blue Chip companies offer highly usable and sellable products and services and are often deemed to be stable enough to weather economic issues. -Ed.] The idea behind this recommendation is to maximize return. However, this strategy is very dangerous. For me, the most pragmatic step to take is to buy risk management assets that can mitigate the impact of life risks. These would be health cards, critical illness insurance and life insurance.

Let me use an analogy to justify this: Buying mutual funds and/or direct stocks is like buying appliances for your house, while buying risk management assets is like building a fence, walls and roof. While doing the former is more enjoyable than the latter, the latter is more essential than the former overall.


FN: How do you assess which are smart investments to make if you're single with no dependents?

PL: Assuming I’m a new investor with an established emergency fund yet have no other investments, I would do what I recommended above which is to buy risk management tools first. It doesn’t have to be big coverages or larger MBLs (health card). Peace of mind is not only about dying to soon, it also applies to "if I get sick, critical or not, my investment fund will not be compromised."

FN: What about if you're single but have senior parents?

PL: Still the same. If I’m a new investor with an established emergency fund yet have no other investments, I would do what I recommended above which is to buy risk management tools first. But a close second would be to look for a health insurance product that could cover my parents.


The problem with buying an insurance coverage for senior parents would be the cost. It would be just too expensive both in absolute terms and in cost-benefit terms. At Philam Life, we create an insurance plan that insures two individuals with one premium.

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