You will be able to say which of your goals CPF can help with and which need cash.
A friend with S$60,000 in CPF tells you she feels well off, then puts her wedding banquet on a credit card. Another friend saves cash for years towards a home and never realises his Ordinary Account could have covered much of the down payment. Both mistakes come from the same gap: not knowing which goals CPF can pay for and which it cannot.
This lesson sorts your goals into the two groups, so you save cash only for the things that need cash.
CPF can pay for five broad kinds of thing. Each has its own scheme and its own rules, and the rules decide how much you can use and when.
A home is the biggest. Your Ordinary Account can pay the down payment and monthly loan repayments on an HDB flat or private property, within limits that depend on the property and the remaining lease. Some purchase costs can also be paid from it, while others need cash.
Healthcare comes from MediSave: hospital bills, some outpatient treatment, and health insurance premiums. You can also use MediSave for approved healthcare costs of close family members.
Insurance includes MediShield Life and Integrated Shield Plan premiums from MediSave, and the Dependants' Protection Scheme and Home Protection Scheme from the Ordinary Account.
Education at approved local institutions can be paid from the Ordinary Account under the CPF Education Scheme, for yourself or certain close family members, and the amount used is repaid later with interest by the student.
Approved investments can be bought with part of your Ordinary and Special Account savings under the CPF Investment Scheme, within limits.
Everything else stays locked until set ages, and most of it is meant for retirement.
There is a catch with using CPF for a home that people often miss. When you sell the property, you must put back into your CPF account the amount you took out, plus the accrued interest: the interest that money would have earned if it had stayed in your Ordinary Account.
The refund goes back into CPF, not into your pocket, so the sale proceeds you can spend in cash are smaller than they look. A couple who used a large amount of CPF on a flat and sell it years later may find much of the sale money goes straight back into their CPF accounts.
That money is still yours, and it will fund your next home or your retirement. But it changes how much cash you can plan to have on the day of a sale. The CPF website has a calculator for accrued interest on your own housing usage. Check it before you plan any upgrade or downgrade.
Many everyday goals sit outside all of those schemes, and they need cash.
CPF cannot fund an emergency fund, because you cannot withdraw it when you lose your job or need an urgent repair. It cannot pay for a holiday, a wedding, a car, a renovation, or day-to-day spending. It cannot pay for courses or education outside the approved list. And most of it cannot be taken out as cash before set ages.
That is why the cash layers come first in this course. Your emergency fund, your spending plan and the irregular costs line are all paid from take-home pay. No CPF balance, however large, can stand in for them.
Here is a worked example with made-up figures. Wei Ling, 29, lists her goals for the next ten years and marks each one.
Her wedding in two years: cash. Her emergency fund: cash. Travel each year: cash.
Her first HDB flat in about three years: both. The Ordinary Account can cover much of the down payment and the monthly repayments, but some upfront costs and the renovation will need cash.
A part-time master's degree in five years: possibly both. She checks whether her course is on the approved list for the CPF Education Scheme. If it is, the Ordinary Account could pay, but she would need to repay it with interest. If not, it is cash.
Her parents' medical bills if they fall ill: both. MediSave can pay their approved hospital costs, and anything outside the approved list needs cash.
Her own retirement: CPF first, through CPF LIFE, which lesson 5.3 covers, with her own savings on top.
Wei Ling sees that three of her seven goals need nothing but cash and the other four need at least some, and that her CPF will do most of its work on the flat and later life. Her cash saving rate was set by the spending plan in lesson 2.2, and this sorting tells her it has a lot to fund.
Each scheme has more detail: the limits on housing usage, how the investment scheme works, how education loans are repaid, and how to make CPF work harder for you. That is taught in CPF Mastery: every account and the choices you control. For this course, all you need is the sorting.
Think about what you want money for over the next ten years, big and small, and keep in mind the question for each one: could CPF pay for it, does it need cash, or would it take both?
List your money goals for the next ten years and mark whether CPF, cash or both would pay for each.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).