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Writer's picturedatascienceinvestor

Singaporeans Are Saving Less

When you look at the recent statistics, it's a little alarming that Singaporeans are hitting rock bottom in savings rate in recent years.


In general terms, savings rate represents the ratio of personal saving to disposable personal income.


Here is a graph which I took from the Singapore Department of Statistics.



In case, you think the figures are getting better. The results for Q2 2024 are pretty bad too.


Based on the report shared here, the personal savings rate dropped to 28.8% in Q2. It's the first time in the past 3 years or so that the personal savings rate dropped to such low numbers.


Is it a case of inflation causing Singaproeans to save less? Well, it could be but I don't think anyone could say for sure.


It's also interesting to see that we have a rather high savings rate of 38% in October 2021. I'm also not sure if that is due to everyone spending less during times of Covid. Most people might be saving their travel budget then, and we all know that travel budget can be quite significant.


In the pursuit of financial independence, savings rate usually matters a lot more than your investment rate of returns. This is especially true in the early stages of wealth accumulation. The first $100,000 is always the hardest and you can barely achieve this sum with just investment returns as your base is likely to be pretty small then. You will need to be able to save significantly before you can achieve this amount of money.



I once wrote a post to enable readers to visualise how long they could have to work at different savings rate and investment rates.


If you are saving at 30% (which kinda resonates with the savings rate of the average population based on the data above) and have 0% invested sum at this moment, you will need 24 years to achieve financial freedom at a 7% CAGR from your investments.


24 is a pretty huge number.


And I guess this is also the reason why retirement seems to be elusive for so many people here.


That includes the rich too.


Based on a recent survey on 505 Singapore respondents, 15% of high-income respondents do not save at least 10% of their income. This is definitely a cause of concern. If you can't save 10% of your income, you can never retire as your expenditure to savings ratio is simply too skewed.


In the same study above, 55% of the respondents highlight that their biggest regret is not saving enough and wisely for their retirement.


With the savings rate on a decline in recent times, I expect more people will express similar regret very soon.


In the path to pursue financial freedom, it's always important to save. And it's even more important to save early. Once you save a sufficient amount of money and invested it, the rule of compounding will greatly increase your chances of success with early retirement.


Based on the same study again, 42% of Singaporeans do not actually plan for retirement until 5 years or less before retirement.


Personally, that is simply too late.


Interestingly, the results are a little different based on a recent poll I did in my Telegram Group.



An overwhelming percentage of the participants in my Telegram Group actually plans for retirement much earlier.


This is likely due to the higher financial literacy among the members in the group.


If you want more information on how to pursue financial independence, join the Telegram Group today. I'm sure you will benefit from the knowledge shared.

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