Save on interest payment

It is important to have an emergency fund that can be used for your unexpected payments. This can save you a lot of interest payment.

Suppose you need $5,000 in an emergency - for medical expenses or disruption in your income. If you borrow $5,000 on your credit card, you have to pay interest of $100 a month (2%) on the roll over. If it takes you 2 years to make the repayment, you would have spend an additional $2,400 in interest payment, on top of the $5,000 that you borrowed (and have to repay).

If you have emergency fund that you can draw down, you can save on the hefty interest payment. But you should have the discipline to repay the borrowing back into your emergency fund - just like you have to repay an external lender.

You should  build an emergency fund of 6 months of your earnings. If you earn $5,000 a month, your emergency fund should be $30,000. You should keep the emergency fund in liquid investment, such as fixed deposit or short term bond. You should avoid investing it into a life insurance policy or structured product where there is a high upfront cost (which becomes a penalty on early withdrawal).

Remember - building up the emergency fund is your top priority - above buying a car or other discretionary expenses.

Foreign exchange training courses

Dear Mr. Tan,
I am a Singaporean PR with a background in the financial services sector. I am quite appalled at much of what goes on here in terms of mis-selling of products and services by the finance-related sectors. I am glad that you have managed to take on some of these issues and wish that the various authorities here in Singapore would be more active.

For the last couple of years I have had various dealings with such groups as MAS, ABS and CASE in my efforts to have some of these bad practises stopped and have had periodic successes.

However there is one issue that I just can't seem to make any headway on that I feel is something that somebody really needs to tackle and that is the selling of "get-rich-quick" type foreign exchage trading courses. This activity has been going on for years here and is essentially an on-going fraud that takes place in full public view, most notably via advertisements in the Straits Times.

The groups behind these schemes have made millions and millions of dollars here carrying out an activity which would be banned in most countries. It saddens me every time I open the newspaper when I see these advertisements because I know that it means yet more people will today be conned out of their hard-earned savings, or taken into debt, in order to attend one of these courses.

I would like to urge you to try to tackle this issue. I think that if you could do so you would be doing the Singaporean people a great service. Many millions have been swindled, but lets not let this practise go on for yet more years. I have realised that my efforts with the MAS, CASE, ABS etc are coming to nothing in this area so I realise it needs somebody of your status to be involved in this if anything is to change.

Please let me know if you would be interested to look into this issue and I would be very happy to help in any way I can starting by briefing you on what I believe are the illegal practises carried out by these groups in full public eye,

Concerned

Social inequality in Singapore

Yee Jenn Jong is a non-constituency Member of Parliament from the Workers' Party. He writes regularly on social and economic issues. Read this article on social inequality in Singapore.