https://www.straitstimes.com/business/invest/when-cash-sits-idle
2025-02-08
Angela Tan
The Straits Times
SINGAPORE – Sam and Serena are like many Singaporeans in that they knew the importance of savings from an early age.
“You have to look after yourself. Don’t expect anyone to look after you,” was a common refrain in their humble households when growing up.
Through hard work, prudent decision-making and disciplined saving, the couple (we are using fictitious names) have a fully paid-up private apartment as their primary residence and a mortgaged investment property that generates steady rental income.
Their investment portfolio is conservatively diversified, featuring holdings in real estate investment trusts, unit trusts and high-quality government and corporate bonds.
They have accumulated $400,000 in daily balance with their bank account, mostly from savings and rental income.
This couple embody the Singaporean dream of financial stability and an enviable cash position. But despite their impressive position, they find themselves at a crossroads.
Sandwiched between kids and parents
Sam, a professional in corporate finance, and his wife Serena, a civil servant, know that their high savings rate has led to an accumulation of cash that is not being fully utilised.
They are not alone.
A 2024 report from Swiss private bank Lombard Odier noted that more than half of the well-heeled in Singapore have increased their exposure to safer assets such as cash or gold.
Mr Francis Liu, chief executive of the bank’s private clients in Asia, says this might not represent a “wholesale flight to safety” but, rather, a hesitancy towards riskier investments such as digital assets and the more volatile shares.
He adds that the well-heeled understand the need for diversifying their portfolio, but this is not efficiently implemented.
Sam and Serena are acutely aware of several significant expenses coming up that will require careful management.
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Like many young parents, one of their primary concerns is funding their children’s education, particularly if they decide to send one or more of them to study overseas. The cost of international education can be substantial, so their goal is to grow their investments to cover this.
A bachelor’s degree in business at the National University of Singapore for undergraduates admitted in 2024/2025 costs $9,650 a year. A similar degree at the University of Melbourne can cost A$49,220 (S$41,300) to A$55,328 a year.
On top of that, they also have to meet their child’s living expenses while studying overseas, including accommodation, food, transport and travel costs.
For instance, living expenses in Melbourne can cost between $2,000 and $3,000 a month, depending on the apartment and lifestyle, according to the university’s latest estimates.
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Sam and Serena are also mindful that they may need to take time off work to care for ageing parents. This could result in reduced income or the need to dip into their cash reserves, which adds another layer of complexity to their financial planning.
They are considering investment options to prepare for this eventuality while ensuring they can provide support without derailing their long-term financial goals of stability and security.
But despite being priority banking clients, Sam and Serena are dissatisfied with the investment advice they have been getting.
For example, they have been keen to explore private equity and private credit, but are unconvinced that their bank adviser has the necessary expertise to guide them in these areas.
The couple lament that the type of investments proposed to them are “limited and seem dominated by unit trusts and investment-linked insurance schemes”.
They want new ways to enhance their portfolio’s growth potential, and are seeking opportunities that will provide even greater security for their family’s future while remaining true to their core principles of financial prudence and balanced growth.
Ms Amanda Ong, Singapore country director and head of international expansion at digital wealth platform Arta Finance, told The Sunday Times that Serena and Sam’s issues with their wealth manager are typical of clients she sees at Arta.
“It highlights the need for many in their situation to address the hidden costs of holding significant cash reserves. Given their various goals, this is where an independent wealth manager can help structure their finances to help meet their life objectives,” Ms Ong says.
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