2 in 3 Singaporeans save no more than 20% of monthly salary

[Musicwhiz]

I am really very very surprised! About 67% of Singaporeans save 20% or less of their income? Yet I see people spending like no tomorrow on holidays, gadgets and cars, so I'd assumed they already socketed a good amount into savings (i.e. paying yourself first) before they started spending.

Just a casual survey - how many % of your take-home salary do forumers here save? For myself, it is 50% but is set to rise later this year.

The Straits Times
Jan 17, 2012
2 in 3 Singaporeans save no more than 20% of monthly salary

By Lim Yan Liang

If your job involves meeting and dealing with lots of people everyday, there is a high chance that you are not saving enough.

According to a JobsCentral survey released on Tuesday, the top three lowest savers are those that work in events management, public relations and sales.

The survey, which sampled 2,278 respondents, said that less than a quarter of workers in these sectors save 20 per cent of their monthly income.

This is likely because of the social nature of their jobs, as well as how they are wired, said Ms Huang Shao-Ning, Deputy Chief Executive Officer of JobsCentral Group.

'The requirement of their jobs to leave positive impressions on new people they meet everyday may translate to higher expenditure on grooming, commuting and entertainment,' said Ms Huang.

'It is interesting to note that the top three worst savers profile workers who require strong social skills and high energy level to perform their task.'

To Ms Valerie Ng, a senior accounts executive who buys around 10 new pieces of clothing a month, the desire to shop might be more of a personality and gender trait than a professional one.

'It's always a thrill to get new clothes, and even if I were not in such a role, I would still buy new clothes,' said the 25-year-old.

'It probably has less to do with the job and more to do with one's personality and being a woman,' she said.

On the other end of the spectrum, the three thriftiest worker profiles are those who work in research and development, consulting, and business development. On average, half of those polled in these jobs saved at least 20 per cent of their monthly income.

In total, two in three Singaporeans said that they saved no more than a fifth of their income every month.

The survey also found out that the bulk of bonus spending went to recreation: more than one third of respondents said holidays and shopping was where the money went. Less than 10 per cent channelled the money into investments, while a paltry half per cent donated to charity.

And, in a sign that Singaporeans are still quite conservative, more than 75 per cent of participants said they preferred to keep their salary information private.

Higher income earners were even more tight-lipped: nearly 90 per cent of those who earned $6000 to $7000 said they would keep their salary in the strictest confidence.

[weijian]

it's about 40% for me. 40% derived from '(cash savings+funds)/take home pay'

[hyom]

For the lower-income, even if they live a frugal lifestyle, it is hard to save more than 20% monthly salary. After deducting unavoidable expenses like children's living and educational expenses, parents' allowance, mortgage payments and insurance premiums (if they bought insurance), there is not much left. It is sad for these people. The moment some accident or a family member falls seriously ill, they fall into financial hardship.

For the middle-income, their best bet to have enough for retirement is consistent savings. Although this is an investment forum, I think saving money consistently is a safer bet to lead a comfortable retirement than investing in financial markets. Most cannot make it and many have problems admitting it until they cannot avoid the stark reality when family members start questioning the deteriorating finances.

For the upper-income, it is hard not to save more than 20% of their income. Their income can cover the basic, unavoidable expenses several times. If they fail to save enough, all they need to do is to adjust their lifestyle. Lucky group. For the lower-income, their expenses are already at a minimum and there is no room to cut. It is hard to escape from this vicious cycle once a person falls into it. Hopefully, they educate their children well because their children offer them the best chance to leap out of this vicious cycle.

[kazukirai]

I am really very very surprised! About 67% of Singaporeans save 20% or less of their income? Yet I see people spending like no tomorrow on holidays, gadgets and cars, so I'd assumed they already socketed a good amount into savings (i.e. paying yourself first) before they started spending.

It's about 30% of take-home for me.

The problem I have with this survey is that it doesn't include CPF which is about 36% (contributions to OA, SA and Medisave) of gross income in their prime working years. Furthermore, there is a whole range of figures that people spend on their Housing needs (mostly mortgage as opposed to rent I venture).

Imagine if I save 20% of my take-home pay and spend say 10% of my monthly income on a mortgage. Even if I exclude the SA and Medisave, that effectively brings my savings rate to 25% of my gross income.

Now contrast with someone who saves only 20% of his take-home and uses all the CPF-OA to pay off a mortgage, the math ((1-0.36)*0.2) works out to 12.8% of gross. That is a huge difference.

And honestly, can we say that there is an optimal level? How do we determine that?

MW, I think you think too highly of most people. Most people I know buy gadgets or go on holidays as long as they have enough in the bank to fund it.

[Musicwhiz]

And honestly, can we say that there is an optimal level? How do we determine that?

MW, I think you think too highly of most people. Most people I know buy gadgets or go on holidays as long as they have enough in the bank to fund it.

Hi Kazukirai, glad you brought this issue up for discussion!

I agree with hyom's view that it is tough for the low to low-middle income people to save because there are unavoidable fixed costs like utilities, transport and food. This makes up a larger % of one's salary if one earns less, as compared to a high income earner.

I guess the question is whether the survey itself was rigorous and representative of the wider population, and that is a debate I had with my wife and some other friends as well. Apparently, 2,300 is a large number (n>30!) but it would of course have been better if the sample size was significantly larger (say 20,000?). Of course, there are other pertinent questions like the age group, gender, income level, occupations and other demographic traits of this group. Is their income skewed away from the median or clustered around it? Without more information from JobCentral, it may be hard to conclude anything useful from this survey.

As to your question, I would think 10% is the starter benchmark as stated in George S Clayson's book "The Richest Man In Babylon". Of course, I am excluding CPF here since CPF is considered "compulsory" savings and you do not have a choice NOT to save. The reason why I use take-home salary is because almost everyone who draws a salary only sees the net amount after CPF flowing into his bank account anyway, and therefore it is more practical to work with this number rather than the "gross income".

That said, if one is able to save 20-30% of their NET salary, I think it's already very good! Perhaps it's not the case where I think too highly of people, but more that I am surprised people don't chuck away more of their salary before they spend?

[kazukirai]

As to your question, I would think 10% is the starter benchmark as stated in George S Clayson's book "The Richest Man In Babylon". Of course, I am excluding CPF here since CPF is considered "compulsory" savings and you do not have a choice NOT to save. The reason why I use take-home salary is because almost everyone who draws a salary only sees the net amount after CPF flowing into his bank account anyway, and therefore it is more practical to work with this number rather than the "gross income".

That said, if one is able to save 20-30% of their NET salary, I think it's already very good! Perhaps it's not the case where I think too highly of people, but more that I am surprised people don't chuck away more of their salary before they spend?

Hi MW,

Oh yes, how could I forget about that rule from "The Richest Man in Babylon". I can understand why one might exclude CPF. As you say, contribution towards CPF is complusory (at least for those not in self-employment which I suspect is more representative) but we can't deny that the existence of monies in our CPF-OA account (of which we can use to pay for housing or invest in CPF-approved investments or just collect the pitiful 2.5% interest) will affect our use of take-home pay and savings behaviour.

At the same time, hyom is right too. There is a minimum level of income needed before talk about what percentage of income you save becomes relevant.

And I just recalled something I read in 'The millionaire next door'. They have a concept called Prodigious Accumulator of Wealth (PAW) vs Under Accumulators of Wealth (UAW). This is based on a formula that compares your Net Worth amassed relative to your income. The formula is (according to Wiki) since I don't have my copy of the book with me is:

PAW: Net Worth > Age*Annual pre-tax income*10%
UAW: Net Worth < Age*Annual pre-tax income*10%

I believe the MAS/Singstat definition of Net Worth includes your residential property (so that throws up the usual debate of whether to include that in your net worth) but otherwise it's a simple Assets - Liabilities calculation.

Would this be a better method for assessing whether one is financially better off or not?

[Mr Nobody]

... If they fail to save enough, all they need to do is to adjust their lifestyle...

Once you are on the "hedonic treadmill", it may be very difficult to come down.

By the way, I told my kids, "...Because we all like to compare, the easiest way to feel rich is to make friends with poor people...". [It will save them a lot of money in the future.]

So a not-so-rich should not aspire to live near Orchard or Bukit Timah or Bishan.

---

Kazukirai learnt that formula from "millionaire next door", mine (same thing) was from the book "money smart":

ENW (Expected Net Worth) = Age x Pre-tax annual household income / 10 (e.g. 45 y.o. x $100k / 10 = 450k)

1. actual net worth > 2 x ENW
over accumulator.

2. net worth = ENW
average accumulator.

3. net worth < 0.5 x ENW
under accumulator.

[weijian]

Perhaps it's not the case where I think too highly of people, but more that I am surprised people don't chuck away more of their salary before they spend?

Could it be the CPF effect (compulsory ~35% savings) that lulls one into a (false) sense of security?

[flinger]

The reason why I don't include CPF into my % of savings rate is because I cannot access the money to be used for planning on how I want to use the money when I retire. I can only plan based on what I am able to control and manage.

CPF money I take it as a bonus sum to be added to what I expect to draw when I retire.

However if you CPF money in OA is far more than what is required for minimum sum and you can take it out then I would include it in my savings rate.

For me, after using it for my housing and the remainder for minimum sum required to be kept in the CPF, I calculate there would be nothing that I can take out.

---

Perhaps it's not the case where I think too highly of people, but more that I am surprised people don't chuck away more of their salary before they spend?

Could it be the CPF effect (compulsory ~35% savings) that lulls one into a (false) sense of security?

Well, it shouldn't because people should know that they cannot access the money for the daily expenditure. They can only use the MA for medical expenses and OA +RA/SA for getting paid a certain sum every month. They cannot plan to use more this month and less next month etc... as they get the same amount every month.

CPF should be an add on to your savings for retirement not the core for retirement.

[Musicwhiz]

Hi Kazukirai,

One method I can think of is how long your assets/savings can last you in the event you stop all active income. That is a measure of one's financial stability. A man with $200,000 but with commitments of $10,000 per month can only last 20 months, compared to another with $100,000 but with only $2,000 commitment per month (can last 50 months).

Anyway, here is the full article from Yahoo!

Events managers are the worst savers in Singapore
The top three worst savers in Singapore are event managers, public relations practitioners and salespeople, according to a survey by , one of Singapore’s leading job portals.
By Juliet Soh

A total of 2,278 respondents took the survey, which was conducted online from August to September 2011. Respondents consist of employed individuals from all levels of occupation and income groups. The survey has an error margin of 2.05%, at 95% confidence level.

According to the survey, the top three worst savers are in:

1. Events Management (21.2% save more than 20% of monthly income)

2. Public Relations (21.2% save more than 20% of monthly income)

3. Sales (23.3% save more than 20% of monthly income)

On the other spectrum, the top three thriftiest workers are in:

1. Research & Development (56.7% of them save more than 20% of monthly income)

2. Consulting (50% of them save more than 20% of monthly income)

3. Business Development (47.7% of them save more than 20% of monthly income)

“It is interesting to note that the top three worst savers profile workers who require strong social skills and high energy level to perform their tasks,” says Huang Shao-Ning, Deputy CEO of JobsCentral Group.

“The more exuberant personalities of these three groups of workers, and the requirement of their jobs to leave positive impressions on new people they meet every day may also translate to higher expenditure on grooming, commuting and entertainment,” she adds.

2 in 3 in Singapore saves no more than 20% of monthly income

66.3% of Singapore workers indicated that they save no more than 20% of their monthly income, according to the survey

The survey also found out that the savings trend is consistent across two vastly different income levels. When comparing those who made less than $1,000 a month and those who made above $10,000 a month, the majority of both groups of respondents indicated that they save 10%-20% of their monthly income. {Note-Amazing!}

Singapore workers are reserved when discussing their salary with colleagues

Workers in Singapore are generally conservative when it comes to sharing salary information with their co-workers. Majority of the respondents (75.7%) indicated that salary-related information should be kept private, and prefer not to share it with their peers in the company.

Respondents with higher gross monthly salary are more tight-lipped about their salary compared to those who earn less. The group who keep their salary in the strictest confidence are those who earn between $6000-$7000. 88.2% of them said they would not let on how much they earn to their colleagues.

Bulk of bonus saved or spent on recreation

44.1% of respondents said they save most of their bonus, and at least one in three respondents (33.7%) indicated that they spend the bulk of their bonus on recreation, such as going on holidays (19.4%) and shopping (14.3%). 12.7% gives most of their bonus to their parents, 9% would put it into investments, and 0.5% said they will donate to charity.