If pets add value to your life, then playing with your dog or giving head scratches to your cat count as emotional dividends, says Gregory Van, CEO of robo-advisor Endowus.
By that logic, buying a pet counts as an initial sunk cost, followed by recurring expenses for food, enrichment and veterinary care. Even healthy dogs will cost paw parents some $3,500 a year, says Van, amounting to nearly $50,000 over the course of its pampered life.
Along with He Ruiming, co-founder of personal finance page The Woke Salaryman, Van discussed how pet lovers can invest for their furry friends at Endowus’ “Managing tail risks: Investing & saving for your pets” webinar on June 16.
“I think people find investing complex, but pets adorable. We want to make it more relatable; we want to help you make an educated decision on whether or not you should own a pet,” says Van, formerly of Grab and UBS.
Cats, for example, would rack up about $2,100 in bills annually; while hamsters would set owners back by a smaller amount of around $620 every year.
As pets age, veterinary costs will begin to increase. “Just a few years ago, I was quoted four hundred bucks for the removal of a gerbil tumor, which was a lot pricier than I thought,” says He. “If you think about it, it's more than 20 times the cost of the gerbil.”
Meanwhile, a diabetic cat belonging to one of Van’s colleagues at Endowus costs the owner $500 in treatment each month. “This is important, right? Pet owners need to think about this before they buy a pet. Because when the time comes, do you want to go through that trauma?” asks Van.
Pet owners should therefore prepare for costs to rise as their pets age. Using the average lifespans of dogs, cats and hamsters to simulate different investment horizons, He illustrated how much money pet lovers should set aside, with returns pegged to the S&P 500’s historic return on investment (ROI) of 7%.
To afford the upkeep of a hamster using investment returns alone, owners should set aside a $6,000 portfolio, says He. Meanwhile, cat lovers should look at investing a $30,000 sum, while dog owners should be prepared to invest $50,000 for sufficient returns.
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Although hamsters may have too short a lifespan for owners to make significant returns from funds, He recommends that they hold investments in liquid instruments for those two to three years instead. “It’s quite difficult to generate guaranteed market returns in two to three years because the market can be volatile. For a hamster, you might want to keep end of life funds in a money market fund.”
Dogs and cats, on the other hand, will be around for more than a decade. “For animals that live for over 14 years, you have no excuse to not prepare for their end of life. In that period, the US market has never returned a negative result,” says He, noting the exception of the dot-com bubble.
That said, these investments are in addition to emergency funds that owners should already budget for, notes He. “Whenever you have a pet, you should always have proper emergency funds. You might have six months’ [worth] of your salary set aside, just to deal with any surprises or bad accidents.”
For such investments, Van recommends Endowus’ suite of advised portfolios, starting with its trio of cash management accounts. The company launched its Cash Smart Ultra tier in April, touting Singapore’s “highest cash management yield”. Cash Smart Ultra, the highest-returning portfolio among the three, targets a 1.8% to 2.0% p.a. yield from its diverse basket of five funds.
Those seeking longer-term goals can invest in its Core Advised and ESG Advised portfolios, which offer pre-selected funds.
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“I hope this has given you some confidence to invest in your pets,” says Van. “Your decision to own a pet can be more confident so that they're always well fed. Most importantly, for them to provide the joy in your life and the lives of your loved ones.”
Cover photo: The Edge Singapore
