Singles’ Guide to Financial Planning
Let’s face it, not all of us are going to get married & start a family. An increasing number of younger Singaporeans are deciding early in life to remain single as part of an “alternative lifestyle choice”.
Some of us simply choose not to, others never meet the right mate. Whatever the reason, singles are a demographic group that can only grow in significance. But singles still need to make financial plans for their future, even if somewhat differently.
The question, then, is: What is special, if anything, about drawing up financial plan for lifelong singles?
The general approach for singles is not dissimilar, in principle, from those with families, but there are a number of specific issues that singles might want to take note of, the most important being dependency.
Many singles who do not need to support their parents or siblings have no dependants at all. But this also means they have no one but themselves to depend upon in their old age. You are your own dependant. The main thing that you need to insure yourself against is the “living death” syndrome where disability or disease strikes & you can’t support yourself.
And the risk of income loss is higher for singles as they don’t have the flexibility of spreading the risk of unexpected income disruption between 2 earners, unlike dual-income married couples.
Therefore, singles should set aside an contingency fund equivalent to between 3 & 6 months’ salary. They should also make sure that they buy enough insurance cover for critical illness or disability. As for retirement, they will need to factor in the cost of engaging long-term domestic help or staying in a nursing home.
Fortunately, many singles have the added advantage of being able to start building retirement nest-eggs earlier in life. They have less competing financial demands than a married couple with children, so they can benefit more from compounded growth & smoothing of investment volatility. But the flip side to having fewer financial obligations is profligate spending. Many higher-earners among singles used to a more carefree life often lack basic financial discipline.
A 2nd key issue facing singles is what happens to their assets after they die. In the absence of specific instructions, assets go automatically to a parent or a sibling. This may not be acceptable to many singles, some of whom have life partners they are not married to by law. Other singles may also want to leave their money to a specific relative or donate it to a special cause.
In the absence of proper estate planning, it causes a lot of inconvenience to distribute your assets after you pass away, even if there is an obvious next of kin. The solution is to draw up a will that states clearly how assets should be divided among parents, siblings, close relatives or a living partner.
Lastly, singles should also review & modify the will with the occurrence of events such as the passing of parents, changing of a relationship with a life partner & so on. At the same time, give someone power-of-attorney. In the event that you are disabled or too ill to perform daily tasks, someone needs to be authorized to act on your behalf, pay your bills & so on.
