I’ve heard a lot of concerns and complaints recently about the Singapore CPF. It seems that there are three main camps of concerned people – those who think their CPF is not generating enough returns (they believe that CPF is cheating them from earning higher returns, and that they can do better if they invested the money themselves); those who believe CPF is too restrictive or confusing (they do not like the regulations and rules, particularly the ones on meeting the minimum sum), and those who flat-out think the CPF is operating like a ponzi scheme. Regardless of which camp the concerned citizens belong to, nearly all of them have one thing in common – they want access and full control over their “hard-earned money” and they want it now. While I can certainly understand these concerns, the counter argument is that compulsory savings is necessary to ensure that people will still have some money left for them in their twilight years. Unfortunately, there are plenty of examples of people who, when left to their own devices, will choose to live paycheck to paycheck, and not build their nest eggs. For most people, it is challenging to resist the temptation to satisfy an immediate desire instead of choosing to delay gratification. The reality is that most people are so encumbered by immediate matters that the important future matters often get neglected. This is why most people wait until a health crisis (e.g., a heart attack) before taking steps to live a better and healthier lifestyle (and often, the crisis comes too late to make any real significant changes). Like it or not, compulsory savings is one method of accounting for these human tendencies, by giving priority now to what is important in the distant future.
But there are a few ways you can feel better about where your hard-earned money is going:
1. Start with Some Faith. If a person truly believes that an opposing person is deceptive and conniving, then it won’t really matter what that other person does or says. Everything that will be said and done will be interpreted as something evil. In order to truly be open-minded and able to listen to what an opposing party has to say, you must have some degree of faith. Put simply, you cannot see through a dirty window until it is cleaned. You may not understand or even agree with what the other party does or says, but you need to give them the benefit of the doubt, and have faith that they are not being surreptitiously malicious or incompetent. Likewise, the opposing party may not understand or know what it is like to be in your shoes either, but they also must have faith that your concerns are important and legitimate.
2. Be Informed. Everyone wants to be heard and understood and if judged, to be judged fairly with all the available facts considered. Likewise, whenever I hear a complaint about a specific issue, I feel compelled to ask that person whether they have thoroughly researched the issue. Nearly everyone I ask will tell me that they have not and that their concern was derived from anecdotal information or hearsay, particularly from pundits and bloggers. It is better to start your research at the source (i.e., the CPF web site) and form your own opinion before zealously endorsing the opinions of others, including pundits and bloggers. Getting information from a friend or relative (or from a pundit or blogger) through a story or an analogy can be wrought with misinformation; things can easily get lost in the translation. In addition to visiting the CPF web site or going to one of their service centres, an additional resource for concerned Singaporeans is to either attend or watch the Parliamentary sessions. In fact, there was a sitting earlier this month, and many issues regarding the CPF were discussed and debated. The comments made by Manpower Minister Tan Chuan-Jin are quite relevent to this point of being informed. He said,
We encourage members who are unsure of the rules to also step forward to request for assistance to navigate these rules. One request I would make, following many dialogues with members of the public, is that they read the materials that are put forward. In many dialogues and conversations, many people get agitated and emotional and argue on points which are already clarified in the materials that we have put out, but they have not read. CPF is an important part of our lives, and it behoves us to read those materials to understand what it is and what it is not.”
Please note that there is a special Parliament sitting session on 4 Aug at 1:30pm.
3. Be Frugal. There are so many things in life that are, for the most part, out of your direct control. Things like your birthplace, who your parents are, and what policies the government enacts. But frugality is, by and large, within your direct control. You may not fully trust the government to take care of your during your golden years, but you can trust in your own ability to save. Yes, I mean save above and beyond what CPF is forcing you to do! Being frugal can allow you to achieve this. And by exerting control over your own domain, you will feel and achieve a greater sense of control in other things as well. In my personal experience, by practicing frugality and actively managing my own finances, it made me realize and appreciate the complexities and consequences in making financial decisions for my own family. For instance, if one member of your family squanders their income and goes into debt it will impact the entire family, even if the other members of the family have been saving. Until you start taking control and knowing the full complete details of your own personal financial situation, can you fully appreciate and acknowledge the difficult task of managing a nation’s finances while meeting the needs of its people.
Lastly, I just want to mention something that I’ve written about in other posts, and that is the idea of tradeoffs. Just like you can’t have extremely high returns without also incurring a high degree of risk, you also can’t have a sustainable system (e.g., such as a retirement scheme) without some rules, boundaries, and limitations. Sometimes, these tradeoffs may not be so apparent or the timing of the give-and-take may be delayed. For example, children who want to become high income-earning adults will likely need to put in years of studying while exerting some discipline to delay gratification. In order to see the tradeoffs implicit in the CPF scheme, you must have faith and be informed; and it also doesn’t hurt to practice frugality to give yourself more options in the long run.