7 Common Financial Mistakes That Most Millennials In Singapore Are Guilty Of Making
Updated: Jan 20, 2021
Truth be told, everyone makes mistakes. Nobody is perfect and mistakes are just part and parcel of life. What’s important is acknowledging our mistakes and learning from them. Pay close attention, because here are 7 common financial mistakes that most millennials in Singapore are guilty of making.
#1 Being Financially Illiterate
It comes as no surprise that many Singaporeans are at a loss when it comes to personal finance, debt management, investing, retirement planning and insurance schemes. Despite boasting one of the best education systems in the world, most Singaporean youths graduate from school without an inkling of knowledge in the area of finance. Financial literacy can empower individuals to make informed financial decisions, enabling one to become financially stable and self-sufficient. The lack of financial literacy, on the other hand, can cause a range of financial problems that will affect individuals of all ages and socioeconomic levels. Remaining financially illiterate is one of the biggest mistakes any millennial can make.
#2 Having No Retirement Plan
Many Singaporeans are ignorant about the importance of having a proper retirement plan, with millennials prioritizing the purchase of an insta-worthy home over saving for retirement.
You may feel that it is too early to start planning for retirement in your 20s, but it really pays to begin preparing as early as possible. By starting early, you can leverage on the power of compounding interest to grow your savings over time more effectively. Sadly, most Singaporeans only start planning for retirement at the age of 38.
If you’re clueless as to why formulating your own retirement plan is so crucial, you can read our article: 5 Reasons Why You Should Start Financial Planning Immediately After Graduation to get a clearer idea.
#3 Having No Emergency Fund
An emergency fund is a sum of money – worth between 3 to 6 months of expenses – that is set aside for use in the event of unforeseen circumstances like accidents, sudden injury or loss of income.
However, most Singaporeans do not have such a fund to help them tide over a rainy period, with millennials said to be just one missed paycheck away from being in a financial crisis. Many Singaporeans aged between 20-35 are also at risk of losing their homes within 3 months of being unemployed.
#4 Having No Insurance Coverage
Insurance coverage, just like an emergency fund, serves as a form of financial risk management as it protects you from financial loss. There are a myriad of insurance options available that can be beneficial for you – such as health insurance, life insurance and disability income insurance. While it is encouraging to know that 69% of millennials are interested to start buying insurance, 44% of you consider yourselves lacking knowledge in this area. This may result in you not buying a plan at all, or purchasing a plan that might not be best suited for your needs.
#5 Excessive Spending & Meagre Savings
The temptation to splurge after receiving your month-end pay is just too strong to resist for some of you, and you end up spending excessively only to leave yourself with minimal savings.
It also doesn’t help that Singapore is the most expensive city in the world, and this just makes it even tougher to save. In fact, a figure revealed by Singapore-based financial website EnjoyCompare showed that 4 out of 5 Singaporeans aged between 20-35 year have absolutely no savings at all. It’s crucial to keep track of your expenses and stick to a budget. If you haven’t begun, you should start saving a portion of your income every month. Trust me, your future self will be thankful for it!
#6 Having ‘No Time’ To Manage Finances
In a hustling and bustling metropolis like Singapore, life can be exceedingly fast-paced. For some of you, it means ‘not having enough time’ to manage your finances. A study conducted by HSBC Singapore revealed that 90% of younger Singaporeans struggled with handling their financial tasks like managing their savings, planning investments and keeping track of bills. Crunching numbers on a calculator doesn’t sound like a fun way to spend your precious free time, but managing your finances should always be a priority in your life and you simply must set aside time for it. If you can spend hours a day scrolling through social media sites, you definitely can allocate an hour or two a week to manage your finances.
#7 Over-Reliant On Parents for Financial Assistance
Don’t be mistaken, relying on your parents for financial assistance isn’t exactly a financial mistake in itself. The real mistake is when you become financially ignorant as a result of being over-reliant on your parents for financial assistance. It is not a stretch to say that many of us rely on our parents for financial assistance, which may come in the form of phone bills, utility bills, housing and school fees. Many of us simply leave such payments to our parents, and are unaware how expensive things can actually be. Without proper understanding of the true cost of living in Singapore, it is not uncommon to see millennials spend frivolously and treat money matters lightly.
Get Financially Literate & Fix Your Mistakes ASAP
Now that you’re aware of the financial mistakes you are committing, you should take active steps to start improving your situation. Once you’re well versed in the art of personal financial management, you can even start working towards financial independence which can allow you to enjoy your dream lifestyle. If you have friends who are guilty of committing any of the above mistakes, share this article with them so that they can improve their own financial situation.
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Written in collaboration with our financial advisory partners at Virtus Associates.