Skip to Content

Could your CPF OA be a portion of your Emergency Fund?

The fallout of an economy that may head into recession is that some unfortunate folks may lose their jobs.

When we lose our job, we need to get another one fast, because without our jobs, we cannot pay for the expenses that we depend on for survival.

This is why stage 2 of a person’s progression in wealth is to have an emergency fund.

The typical advise for how much emergency fund you require is about 3 to 6 months of your salary or monthly expenses.

This would mean that this emergency amount can tide you through this long.

However, one big expense that Singaporean’s face is to service the mortgage.

If you lose your job, the biggest problem is that. For HDB, they cannot take away your home, but if its private loans they may be able to foreclose your home if you cannot service it.

If you failed to war-game and think through this scenario, and purchase a dwelling that is too expensive, you better hope you can find a job fast.

In Mr 15 Hour Work Week’s recent article, he talks about preparing for these scenario, and this is especially important considering he is doing a quarter retirement.

Part of his emergency fund is in the form of a$40,000 CPF OA allocation which can be tap to pay his mortgage when he cannot find tuition work and if the wifey is unemployed.

I never thought of it that way, but each of us cannot put the first $20,000 of our CPF OA into other kinds of investment.  Combined, this amounts to $40,000.

The monthly mortgage payment for various mortgage loan is as follows:

  • $480,000: $2170 /mth ($26,040/yr)
  • $300,000: $1356 /mth ($16,272 /yr)

The $40,000 could possibly last you for 1 year plus and in the case of $300,000 mortgage 2 years.

This plan is rather splendid, but the problem for most is that they tried to structure their loans such that they pay it down fast and consume all their CPF OA.

Their CPF OA do not build up and thus they do not have this “emergency fund”

It gets worse when the savvy folks decide to voluntary top up their CPF SA with their CPF OA money, to earn a 1.5% higher interest and let the magic of compounding work for you.

This is why I see it as a valid reason not to voluntary top up to CPF SA, but choose to put it in equities or unit trust. The fate of your money is in your hands, but in the worst case you can liquidate and keep your dwelling, depending on which is more important to you.

With all things, you can structure to pay down your loans fast with CPF OA and you can top up your CPF SA. You just have to make sure your plan for these unforeseen scenarios are comprehensive and fundamentally sound.

By this it means, really saving cash for this scenario, or make sure you have an alternate cash flow stream that can alleviate this.

When it comes to having a peace of mind, I find that this has become more of a forgotten art.

They know they need something like that. But they cannot find the money to build it up.

As much as we can drum on about it, the folks who needs it the most, probably think its a luxury to have emergency cash.



This site uses Akismet to reduce spam. Learn how your comment data is processed.


Thursday 21st of January 2016

Sidetrack here. Wonder why you did not include bank stocks in your "High Yield Dividend Stock" as currently the yields are going up? Also what's Your take on the banks' stock directions? Seems prices now are getting attractive. Banks shares are also now more affordable as the minimum number of shares to purchase has reduced and further it is "safer" than others, I believe. Tks!


Friday 22nd of January 2016

Hi Winston, not much reason other than I need to maintain the tracker so I have to pick and choose! But I will add it soon. Banks may be exposed to non performing loans in various counterparties of borrowers. The usual valuation metric is price to book. try to buy below 1 and probably below 0.8times


Tuesday 19th of January 2016

May be we just call it self-unemployment fund and then CPF OA will fix in nicely. :-)


Friday 22nd of January 2016

hi Uncle CW, perhaps you could elaborate further.


Monday 18th of January 2016


Be clear about what is returns, liquidity and certainty. They don't always aligned.

Too much money in OA gives you returns and certainty but no Liquidity when you need to solve immediate cash flow needs.


Monday 18th of January 2016

hi FCY, thanks for the contribution. i think perhaps my articulation was pertaining to an unemployment event. if i know the risk, perhaps it is not an emergency after all

Jared - SMOL

Monday 18th of January 2016


I won't comment on the specifics of CPF OA and SA, but to me, the key criteria of an emergency fund is QUICK access.

My 5000 years of collective Chinese ancestry wisdom tells me far water cannot save near fire ;)


Monday 18th of January 2016

hey boss, i think you are right based on that definition, then perhaps my emergency is unemployment. so in that regard, i am wrong there!


Monday 18th of January 2016

Gd point. This is why I took out the max 30-yr loan for my rather affordable HDB. Rather than be debt-free in HDB 2.6% anyway. My CPF OA can easily pay for years of my HDB loan payments and eventually, my CPF interest earned will start paying for my flat for me. Just my way of handling this whole HDB/CPF situation.


Monday 18th of January 2016

oh Kevin, you meant that the cpf oa interest might pay for some of the monthly loans? that will be great!

This site uses Akismet to reduce spam. Learn how your comment data is processed.