Put aside all the “propaganda” you see online today on investing, trading and fanciful financial products. The first step towards financial freedom should always start with savings.
If you are someone with a great level discipline to save, great! Kick off your savings routine today!
If you are someone who lacks the discipline to save, set up your own system to set aside a portion of your money before it reaches the “leaky bucket”.
How much savings should you have accumulated?
To answer this question, allow us to visualise your life in front of you.
Instead of coming out with an absolute amount of savings, we base the savings amount on your individual yearly expense. This amount varies for each individual depending on the lifestyle which one chooses to lead.
To give a good projection of how much one needs to save, we took into account these factors:
Singaporean male to go through 2 years of National Service (NS)
The lower savings rate for an early stage in life (lower pay, higher financial commitments such as student loan, marriage and housing loan)
Higher savings rate closer to retirement
Retirement is at age 62
The life expectancy of Singaporean male is 80 and female at 85 years old
The age that one starts working
Years to save up for retirement
(retire at 62)
Years to enjoy retirement
Male Diploma Graduate
(after NS)
22
40
18
Male Fresh Graduate
26
36
18
Female Diploma Graduate
20
42
23
Female Fresh Graduate
24
38
23
The savings rate of a male fresh graduate
Using a male fresh graduate as an example. A male fresh graduate will have the least time to save (36 years to save up 18 years worth of expense).
From there, we work backwards to give a projection of how much you should have saved by a certain age.
To get an exact number, simply use:
(How much you need to survive per year) X (Number of years)
Age
(Male Fresh Graduate)
Savings Rate
Annual Expenses Saved
26-30
Low Salary
Clearing Loans
(Very Low)
At least 6 Months
31-35
Marriage
Housing Loan
(Low)
At least 1 Year
36-40
Kids Education
Housing Loan
(Low)
3-6 Years
41-45
Kids Education
(Low)
4-8 Years
46-50
Realised you need to SAVE for retirement!
(High)
6-10 Years
51-55
Debt free
(High)
7-12 Years
56-62
Retirement Planning
(High)
At least 18 Years
Target at age 62:
At least 18
The savings rate of a female fresh graduate
Taking life expectancy into account, females tend to live longer than their male counterparts.
With this, female face a steeper saving slope due to the need to save an additional 5 more years worth of expense.
Age
(Female Fresh Graduate)
Savings Rate
Annual Expenses Saved
22-25
Low Salary
Student Loans
(Very Low)
At least 6 Months
26-30
Low Salary
Student Loans
(Very Low)
At least 2 Years
31-35
Marriage
Housing Loan
(Low)
At least 6 Years
36-40
Kids Education
Housing Loan
(Low)
8-11 Years
41-45
Kids Education
(Low)
9-13 Years
46-50
Realised you need to SAVE for retirement!
(High)
11-15 Years
51-55
Debt free
(High)
12-17 Years
56-62
Retirement Planning
(High)
At least 23 Years
Target at age 62:
At least 23
Further reading: Are you saving more than an average singaporean?
Do take note if you fall within the below demographic:
Monthly income of $4,056 (inclusive of employer CPF contributions) and above
25 years old and above
97per cent of middle to high-income earners above the age of 25 years old are saving between 30per cent to up to 49per cent of their salary. How much of your salary are you saving?
Seedly’s tips: How to determine my best savings rate?
Assuming your determination to save up brought you down so “far” this article, here’s a simple exercise to determine your saving rates.
Taking into account that different individual has different
Salary
Financial commitments (housing loans, student loans)
A good exercise to determine your best saving rate is
This article was first published in Seedly. All content is displayed for general information purposes only and does not constitute professional financial advice.
SavingsretirementRetirement planning
