Understanding CPF
Here Is The Reason Why The CPF Ordinary Account Is Very Important To Singaporeans
Almost everyone knows that we contribute part of our income to our own respective CPF accounts. Even though a good percentage of our income goes to the CPF, we do not give much attention to it.
However, only the Ordinary Account (OA) is so-called the most important account when we come to think of our CPF account. Wondering why? Continue reading and find out why.
READ ALSO: 3 Important Facts About Your CPF Ordinary Account (OA)
We need it to buy a home
Imagine if the CPF does not exist, have you ever wondered if you are even able to afford your HDB flat?
Build-To-Order (BTO) flats prices are increasing and it is beginning to look impossible to even own a home. However, with the help of our CPF monies, we are able to afford it.
A $400,000 flat would mean that you would need at least a downpayment of at least $40,000.
The question is, do you have $40,000 lying in your bank account in your 20s?
Kudos to you if you do. But if you do not have that amount, you might be left wondering on how are you able to find that amount of money.
After several years of working and diligently contributing to your CPF account, you do have that amount of money to afford the downpayment.
Furthermore, the mortgage on the flat is also payable with your CPF money. That as a matter of fact is really helpful in managing your cash flow and reducing the amount money used on housing.
Thus, your OA is really important. You might need a few more extra years prior to even have your own flat.
READ ALSO: Useful Facts About The CPF Contribution & Allocation Rates
And yes, it pays for insurance
Some might not realize this but your OA is paying for your insurance coverage.
Home Protection Scheme (HPS) is a term insurance that will pay off all or part of the mortgage upon death, terminal illness or total & permanent disability of the owner.
The HPS is a way that you can make sure that your surviving family members who live in the flat can remain to stay in the flat even after your demise.
On the other hand, the Dependant Protection Scheme (DPS), is also another term insurance where a lump sum of money will be paid out your beneficiary upon death, terminal illness or total & permanent disability.
Both the HPS & DPS are both good financial assistance when things go bad. And yes, you are not putting a single of money to fund the premiums. It is all payable with your OA.
READ ALSO: The Value Of The Home Protection Scheme
Save some later on in life
We have to always know what the CPF is for. It basically is the Singaporean version of a social security. In other words, it is for retirement.
Thus, if you choose to exercise a lot of your OA funds in your earlier part of life, there might not be much left for the future.
Hence, use your CPF funds wisely or you might regret it in the future.
That comes to the end of this article. Hope that this is beneficial for you and do share it with your family friends. Till next time.
Disclaimer:
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but maybe irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
