How to start investing and saving as a young professional

Frequently asked questions about saving and investing

• What are the best investments for young professionals?

  Unit trusts are a great way to start investing. Collective investment schemes like unit trusts have a dedicated fund manager controlling the investment, and this can provide a you a softer landing into the world of investments. Endowment policies can also be a great beginning investment option, especially if your tax bracket is over 30%.

  Ensuring your investments are as tax-efficient as possible will also help grow your wealth in the long-term, so consider whether investment income in the form of interest or dividends is more efficient for your tax bracket. Your financial advisor can guide you on the best structure for you.

• Is paying off debt better than investing?

  Paying off debt or investing depends on your financial position, and whether interest you earn on your investments exceeds the costs of your debt. But when repo rates are low, it might be prudent to cash in and service more of your debt so that you can use that money for investing and saving and growing your wealth.

  Ideally, you should structure your finances so you can pay debt, invest and save. This is where the 70/30 rule comes in.

• What is the 70/30 rule?

  The 70/30 rule is a guideline for how to manage your income, where 70% of it is used to cover expenses, including paying off debt, and the remaining 30% of your income is saved and invested (20% saved, 30% invested).

• What is the difference between savings and investments?

  Saving is putting money away to use in the future. Investing is converting that money into a productive asset that can grow its capital value over time.