Read on to understand the 4 stages of the traditional wealth cycle.
- In the early years of our working lives, we tend to spend relatively more than we earn. Cars, stereo equipment, overseas trips and other things deemed essential to the well-being of today’s modern youth, usually consume all and often more than their income. The temptation at this stage is to buy items on credit on the assumption that there is plenty of time to repay the debts. The attitude is often to spend now and pay later.
- Marriage – the arrival of children and the apparent “necessity” for your own home and a second car – takes this spending pattern further into the depths. The advantage of a second income is usually short lived as one parent stays at home to mind one or more infants. The financial cost of children is often a burden on families, and although the cost of each subsequent child diminishes, the longer a family takes to move through these family years the greater will be the delay in the upswing.
- With time comes greater work experience and skills, and an increase in income. A developing trend is for the second parent to return to the workforce as their children become less dependent. It is from this time that most families experience their greatest rate of wealth accumulation. It is also the time that the 40 to 50 years olds begin to have some serious thoughts about saving for their retirement.
- On retirement, wealth begins to be depleted as EPF becomes the only source of income and leisure becomes a major consideration.
