Your Savings Today – Do You Have Enough For Your Future?

As we head into our 30s, “Am I saving enough?” is a question that many Singaporeans tend to ask ourselves. We are concerned about our financial health and, true to our competitive nature, most of us are curious to know where we stand compared to the average person.

How much savings is enough?

As covered in our previous article, an emergency fund should be your top priority once you have earned your first income and it is recommended to build your emergency fund at least 3 to 6 months of living expenses. Beyond that, it is understood that you are setting aside additional savings for investments or your retirement fund.

Unfortunately, every source you find will give you a different number - ranging from savings of at least 6 months’ salary by the time you’re 35  all the way up to 1.5x of your annual salary, assuming that you earn S$100,000 by the age of 35.

If you are 35 and earn S$60,000/year or S$5,000/month, you should have at least S$30,000 in liquid cash savings available in case of emergencies, and an additional S$90,000 set aside for your retirement and investments. This is a recommended comfortable state of finances and you can adjust it according to your own current and future standards of living. In Singapore, this S$120,000 may be a combination of your own savings and your CPF.

If you are currently at or beyond this target, then congratulations! It means you are on the right track to a financially sound future.

Not saving ‘enough’?

If you find yourself short of the numbers above, you are not alone. Perhaps you just purchased a HDB flat or condominium, or purchased a new vehicle - you might have dipped into your savings for that.

In Singapore, approximately 50% have sufficient savings to last six months. In this case, the more important question to ask yourself is – do I have enough to meet my personal (and family) financial goals?

If, for example, you’re a family person, you would need to take into account costs for your kids and their future education. The definition of “financial well-being” can differ from person to person and need not centre solely on your liquid assets. In essence, there is no one-size-fits-all amount to be saved.

The numbers shared above serve as a good rule of thumb for you to follow. However, by setting financial goals, you determine specific targets that will meet your personal needs, giving you a sense of satisfaction when you meet or exceed them.

Setting your financial goals 

Whether you are at the start of your financial goals journey or already well along the path of future financial security, you should organize your financial milestones according to short-term, medium-term and long-term goals.

Short-term goals would include immediate, upcoming expenses such as a new car, or a long vacation at the end of the year. Medium-term goals may include things such as upgrading your property and loan repayments over the next 5-10 years. Items such as saving up for your retirement or your children’s future education count as your long-term goals.

Saving up over the long-term

Saving is a great habit built through making conscious decisions every day. As you develop this habit, you will find yourself saving more each month, and meeting your short-, medium- and long-term goals gets easier.

Sometimes, for your long-term financial goals, simply saving may be insufficient. In Singapore, 37% of people do not know the best way to grow their money. This is where you can work with financial advisors to determine the best way to invest your savings for the optimal returns based on your risk appetite.

An often-overlooked investment is investing in yourself. Learning new skills or furthering your studies could potentially lead to an increase in earning power over the long-term. You can reach your financial goals faster through promotions or a change in job role.

So finally, how much is enough?

The answer – enough to be able to afford your short-term goals without compromising on your medium- and long-term goals.

Instead of comparing yourself with everyone else, focus on your own lifestyle, goals and expectations. Understanding what you need for a meaningful and enriched life will save you the unnecessary pressure and dissatisfaction from not fitting into a certain formula.

Disclaimer:

This article is for general information only and does not take into account the specific investment objectives, financial situation or needs of any particular person. The views expressed herein do not necessarily reflect the views of AXA Insurance Pte Ltd and should not be construed as the provision of advice or making of any recommendation. There is no intention to distribute, or offer to sell, or solicit any offer to purchase any product. We recommend that you seek the advice of a qualified financial advisory professional before making any decision to purchase an insurance or investment product. Whilst we have taken reasonable care to ensure that all information provided was obtained from reliable sources and correct at time of publishing, information may become outdated and opinions may change. We are not liable for any loss that may result from the access or use of the information herein provided.