Undergrad saver believes in the power of plastic

Me & My Money Series (Sunday Times)

I think this week's interviewee is interesting. He uses a pre-commitment strategy to save (CIMB account so that it's harder to take out cash), manages cashflow by juggling between credit cards (tricky but good skill to learn for any business person) and that his dad used a co-savings program with him when he was young instead of buying him the object outright. Nothing much to say about his investing but I guess that's not really the point here.

Undergrad saver believes in the power of plastic

Undergraduate Tay Bo Yi carries little cash in his wallet as he prefers the convenience of cards.

The Nanyang Business School undergraduate toggles between his debit and credit cards, to maximise his credit for the month.

Due to his heavy card usage, his pocket is full of online bank tokens - six to be exact - so that he can check his balances.

But Mr Tay, 23, is no big spender. At the age of 14, he already understood the idea of locking up his savings in a dedicated bank account, and having a separate one for expenditure.

The young saver, who lives in an HDB flat in Jurong, is largely influenced by his civil servant father who often gives him advice on money matters.
With his preference for credit cards, the marketing major who runs a small online business wants to learn more about how they work.

"I am interested in joining a bank and marketing credit cards. The use of credit cards is a win-win situation for banks, but not for merchants.
"Why is it that you use a card and you can get 10 per cent off spending, but don't when you use cash? I want to find out the mechanism behind this, and how banks make money from credit cards."

Q: Cash or cards?

I like to use cards. A lot of my friends are cautious about getting cards because they are worried about overspending. My dad said: "Just be responsible for what you spend."

I signed up for debit cards because of the promotions they offer, such as dining privileges, and some give cash rebates.

Even though it's not a lot, if you accumulate your spending in one card, and they offer a 1 or 2 per cent rebate, every month, you could get $10 to $20 in rebates, which is better than nothing.

Q: How many cards do you have and how much do you spend a month?

I have four student credit cards, each with a credit limit of $500, which translates to up to $2,000 in unsecured loans. A cardholder can get up to 55 days of grace period for repayment.

I have Maybank and Citibank credit cards. I used to have banking accounts with them. I signed up for cards from the three local banks for the convenience and card promotions. My Standard Chartered bank token is interesting as it comes in the form of a card.

I use my credit cards a lot, to buy goods online for my business.

I charge about $200 to $300 every two weeks. In one month, I can spend about $1,000 to $2,000.
Because every transaction is recorded, you can see what you're spending on each month.

Q: How do you manage your money with all the various cards and accounts?

Since the credit cards have different payment dates, I just switch among them. So if one payment is due in 55 days from the middle of a month, I don't have to pay it immediately and can instead choose to pay for something else first. If I have some credit for one month, I will adjust my payment accordingly.

I also like instalments. If I pay for a $400 mobile phone by monthly instalments, at least I feel that I'm getting value for what I'm paying for each month.

Q: Describe your money management style.

I have a CIMB Bank account. Since CIMB doesn't have ATMs islandwide, which makes it inconvenient for me to withdraw cash, I park all my savings there. It's like long-term savings to me, especially when I need to repay my student loan in a few years' time.

I have some money from an insurance policy, one endowment plan, and a fixed deposit that provides insurance.

I also buy shares online through Standard Chartered. It costs about $2 a transaction, compared with $25 a transaction charged by other brokers. I have invested about $3,000 to $4,000 in shares which I plan to sell at the right time.

Q: Tell us more about your business.

I sell phone screen protectors online which I consider a low-risk, low-returns business. I initially invested only $10 but slowly accumulated more stock over time. I have earned about $15,000 in three years and saved all of that.

Q: Moneywise, what were your growing-up years like?

My dad has always been telling me to save, invest and be prepared for the future. I once wanted to buy a Game Boy gadget when I was in primary school.
Instead of buying one for me upfront, he gave me a container and would drop in $5 every day.

He said: "You can buy it when the money hits the amount that the Game Boy costs, and if you do well for your exams, I'll put in a bit more."
It's always been about saving up for the things you want to buy or really need, and not impulse spending.

Q: What advice has he given you?

When I have money, buy property, don't buy a car. A car depreciates but property will keep appreciating, at least in Singapore. You may even get passive income.

Q: What do you invest in?

I've been focusing on real estate investment trusts, which pay out dividends every quarter. If I buy one lot for $2,000, every quarter I get a bit of money, say $10 to $20. I can get more money from the payout in a year than from bank interest.

I've always taken note of initial public offerings, because if you manage to be allotted even just one lot, you may be able to make around 20 per cent profit if you sell it later.

Q: What's the most extravagant thing you have bought?

A MacBook Air for $1,200, which I paid for by credit card to get the 2 per cent cash rebate. It was my first Apple product.
I don't usually buy premium products. I could have bought another brand for less, but I wanted something different and I don't regret it.