Millennial Money: How much should I save, spend and invest every month?

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Millennial Money: How much should I save, spend and invest every month?
Millennial Money: How much should I save, spend and invest every month? (PHOTO: Getty Commercial)

SINGAPORE — No matter what stage of life you are in, you are never too young — or too old — to save or to invest money.

A whopping 75% of Singaporean youths are more concerned about their finances now as compared to before the pandemic, according to data from a SingSaver survey dated April 2021. But how much exactly should one save, spend and invest every month?

This is part of a series where Yahoo Finance Singapore will focus on different aspects of millennials and finance. In this second part, we speak to several financial experts who share their thoughts on what young adults can do.

The 50-30-20 rule

Most of the financial experts agreed that youths should follow the well-used 50-30-20 rule popularised by US senator Elizabeth Warren.

“The 50-30-20 rule advocates splitting one’s income into three categories – 50% on essentials, 30% on discretionary spending, and 20% on savings or investments,” explained Ernest Cai, Director of Client Success at ProsperUs, a digital investment service.

However, Cai cautioned that the 50-30-20 rule serves as a guideline and can always be tweaked to better suit one's profile, given that some youths are still schooling while some might already be working.

The general recommendation is to save at least 20% of one’s income every month. But if you cannot start with 20%, starting with 5% or 10% will help too because doing something is better than nothing, added Cai.

In particular, students should be able to save more as they are probably still staying with their parents and getting pocket money from them.

“Students have low basic needs so they can afford to allocate 25% to their needs, 25% to their wants and the remaining half (50%) to savings and investment,” said Ezekiel Chew, Founder and CEO of Asia Forex Mentor, an online trading mentoring service.

“It is important to acknowledge that there will be different needs and wants at every stage of life but the end goal would be to achieve financial freedom,” added Chew.

Importance of savings

Assuming a student receives an allowance of S$10 a day, and spends half of it (S$5) on needs and wants, he will have a balance of S$5 left for savings and investments. This could easily add up to S$150 a month, which is a good starting amount to save or invest.

However, some students that Yahoo Finance Singapore spoke to do not necessarily save that much. University undergraduate Tay Wee Teck, 21, saves only 5% of his internship salary of S$650. He invests 30% of it and spends the rest on his wants.

Similarly, fresh graduate Celestee Low, 23, saves 30% of her allowance while spending the other 70%. Low currently receives a small sum of money from her parents every month as she is still looking for a full-time job.

“When I receive my allowance, I would transfer 30% to my savings account off the bat, but if I have money left over at the end of the month, I save that too. I have been hesitant to start investing because I don’t have my own income yet,” shared Low.

“I also do my part to be careful with what I spend on, such that I’m never spending above my means and I’m also saving some money.”

Some of the financial experts also suggest that youths who are still schooling could work with their parents to explore options of placing their savings in high-yield savings accounts or endowment plans.

For young working adults, while the percentage to set aside for savings becomes smaller, the value should be larger because of higher inflows.

Assuming a fresh graduate earns S$3,000 a month, he might need to spend 70% of it on basic necessities such as meals, transportation fees and bills. This leaves around S$900 for savings and investments, which is way more as compared to a student.

Ironically enough, some have benefitted from working from home during COVID-19. Digital consultant Jason Goh, 26, who earns S$2,800 a month, is usually able to save at least S$1,000 a month. Now in the midst of the pandemic, he saves more than half of his salary.

“Working from home allows me to save more money as I can cut costs from travelling to and from work, as well as on food. This gives me more leeway to invest in other things such as donating to charitable causes,” said Goh.

Responsible financial planning

Ultimately, financial experts believe that the planning of one's monthly income is crucial regardless of one’s age, life stage or salary.

“Recording your monthly expenditure is an excellent way to keep track of your monetary outputs as well as actively saving for rainy days purposes,” advised Eng Thiam Choon, CEO of Tiger Brokers Singapore, a brokerage firm.

“While making purchasing decisions, youths can also consider wisely the purpose of their expenditure to better manage their expenses and not overspend,” added Eng.

Similarly, Gregory Van, Founding Partner of Endowus, a Singapore-based financial technology company, shared some key tenets to responsible financial planning.

“Youths should be disciplined about their spending and differentiate between needs and wants, especially for larger ticket items,” said Van.

“It is also important to think about short term financial goals and work towards them. For youths, it can be saving for a down payment for their new home or even a holiday overseas.”

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