Excuse me, are you a millennial? Time to get financially sound
You’ve just stopped taking a monthly allowance from your parents and have begun earning your own keep. At this point, it is easy to feel overwhelmed, especially if you lack the proper foundation to make informed decisions about your money.
According to a recent HSBC report, Singapore millennials have among the worst retirement prospects of any generation, with only eight percent of people surveyed thinking that the generation is well placed for a comfortable retirement. But why is that? If you are among those born between 1982 and 2004, these are the top three financial issues that could be affecting your ability to afford a home and retire when you want — and what you can do to correct them.
A financial knowledge gap
“Money management” and “investment” are two terms that are commonly heard when you enter the working world, but most people have little knowledge about either. Unsure about how much you should save and confused about what you should invest in? Don’t worry! There are various online apps and portals, such as MoneySENSE, that can help you to brush up on financial literacy and take control of your money matters. Alternatively, seek advice from a financial consultant on how to budget wisely and grow your savings to meet your long-term financial goals.
The thought of growing your savings may present a struggle for many who are just starting out in their careers and not yet drawing high salaries.
Look at it as an early investment. Instead of splurging on expensive dinners and trips abroad now only to find yourself struggling financially in the future, you could cultivate a habit of saving from the start of your working life to enjoy a worry-free early retirement later on in life. The general rule of thumb is to save at least 10 percent of your income every month. To ensure that you save regularly, set an automated arrangement where a portion of your income is channelled to a savings account every month. While it might require you to make small sacrifices in your lifestyle, it will go a long way in helping you to build a healthy cash reserve that could take you one step closer to achieving the Singapore Dream of owning a nice car and home.
Many millennials lack the confidence to invest, preferring to keep their money in the bank. However, leaving your savings untouched in your bank account could actually cause you to lose money with rising inflation.
Start investing early, as compound interest will work to your advantage. Aim to invest at a rate of return above the inflation rate to ensure that you do not lose purchasing power over time. If you do not understand a particular product or scheme, approach a financial consultant for advice. A trusted consultant will be able to recommend a portfolio that best suits your current financial capability and future investment goals.