Build up 6 to 12 months of savings

Hi Mr Tan,
I have read the draft 5a of your Financial Planning book. It is a great read and contains many practical financial tips.

Would it be better for young people to clear off their debts (e.g. study loans, wedding loans, renovation loans, car loans) before embarking on an investment plan?

Most young people are short-sighted and do not see the benefit of saving 6-12 months of their salary. Recently, I have attended a course which covered personal finance. The trainer said that it is beneficial to have savings to fall back on as you can treat it as a interest free loan instead of borrowing from the banks.

Considering how much the banks are charging for the loans, I realised that having money at hand to handle personal emergencies is very important indeed.

Would you agree that for a HDB housing loan, it would be better to borrow to the max(30 years) as Mr Larry Haverkamp has suggested in his articles. What are your opinions for a bank housing loan as a comparison? Do you agree that housing loan is probably the only loan that we should not draw down on even if we have the means to do so?

REPLY
I agree that it is better to pay off the loan, if they carry a higher interest rate than the yield on low risk investment (say 3%). As HDB loan is 2.6%, it is better to take the max loan from HDB and invest to earn more than 2.6%. I agree that a housing loan is probably the only loan that you should have in your lifetime.