SINGAPORE — It is without a doubt that COVID-19 has affected the economy and threatened job security, even that of young people. According to a recent report by YouGov, a market research company, one of the top financial priorities for youths in Singapore is to be better prepared for future financial hardships.
This is part of a series where Yahoo Finance Singapore will focus on different aspects of millennials and their finances. In this first part, we speak to several financial experts who share tips on what youths can learn from their COVID-related money struggles.
Practice good saving habits
When COVID-19 hit our shores, two in three Singaporeans did not have more than six months’ worth of savings to sustain their current lifestyle if they lost their income, according to an OCBC report in June 2020.
“Before you can run a marathon, you need to get into basic good health. Similarly, before you think about saving for the future, you must have sufficient liquidity and a good base of savings,” said Chuin Ting Weber, CEO of financial adviser MoneyOwl.
“Moving forward from COVID-19, it is important to start developing a discipline of saving as much as you can and living well within your means. Don’t overextend yourself in terms of loans or debt,” added Weber, who stressed that compounding can actually work against you by ballooning your debt.
Other financial experts also advised youths to have control of their finances and not splurge the moment they receive their salary or allowance.
“As simple as it sounds, I believe that this is the most challenging obstacle one has to overcome as we are exposed to a monstrous amount of temptation every minute to buy new things both online and offline,” said Eng Thiam Choon, CEO of Tiger Brokers Singapore, a brokerage firm.
In a similar vein, it is important to have an emergency fund strictly set aside for future financial hardships such as if the COVID-19 situation worsens the economy again. A good amount in an emergency fund would be up to six months’ worth of personal expenses.
“It could be a recurring contribution or a lump sum contribution, but having an emergency fund means that it could help you get past difficult days,” said Eng.
He explained: “Contributing S$100 a month will give you S$1,200 in a year and S$12,000 in ten years. In fact, contributing a sum of your red packet money could go a long way too!”
Work while you are young
For youths who are still schooling, Srihari Sikhakollu, CEO of online money transfer service eRemit Singapore, suggests that they work part-time during the semester break to earn additional income on top of their allowance which can be put into their emergency fund.
“Alternatively, youths can choose to take up freelancing as another way to make extra money. This way they can also gain valuable experience and get a glimpse into what the working world is like,” said Sikhakollu.
Fortunately, there are youths who have already thought of working while they are young so that they can save more for future rainy days.
For 21-year-old Tay Wee Teck, the current COVID-19 situation has put significant financial pressure on his family, but he is willing to work the extra mile if needed.
“My savings from National Service will be able to tide me through at least for the short term. But if the COVID-19 situation continues to take a huge toll on my finances, I may take up part time employment to supplement my family's income,” said Tay, who started his university education in August 2021.
Similarly, Singapore Management University (SMU) undergraduate Celine Low, 21, took on a part-time waitressing job at a cafe in 2020 to help her family’s finances.
“While my parents still give me a small sum of allowance, I decided to work so that there is some form of solid financial security during this pandemic,” said Low, who earns around S$850 a month.
This helped sustain her finances when Singapore went into Phase 2 (Heightened Alert) in May 2021 and she could not work because dining-in was banned.
Improve your financial literacy
But of course, it’s not just all about working and saving money – you need to know where your money goes.
Data from a SingSaver survey in April 2021 show that nearly half of Singaporeans (48%) have started to track their expenses on a regular basis. In fact, a whopping 75% of Singaporeans are more concerned about their finances, as Singapore slowly begins to reopen its economy.
As such, experts recommend youths to create a budget sheet to have a clear understanding of how much they have been spending and where they have spent it on. It is also crucial to learn more about managing one’s finances.
“Talk to friends who are interested in finance and be part of friendship groups that discuss investing, digital money and finance subjects. You can also read on financial investments and stay abreast of industry developments and news,” advised Sikhakollu.
Additionally, the COVID-19 pandemic has given rise to greater adoption of digital forms of information, which makes it easier for one to gain financial literacy.
“Being more sceptical than the older generations, millennials are also more aware of the high costs charged by traditional financial institutions and will be more price and cost-sensitive,” warned Gregory Van, Founding Partner of Endowus, a Singapore-based financial technology company.
“Hence, youths should equip themselves with the knowledge and skills of how to properly manage their money effectively.”