Singapore (30 Nov 2020) – The financial wellbeing of Singaporeans worsened this year compared with last year, brought about by the COVID-19 pandemic and the ensuing slump in the global economy, OCBC Bank said.
Singaporeans’ financial wellness measured by OCBC Financial Wellness Index dipped to 61 points, down from 63 points recorded last year.
Job losses and salary cuts hit Singaporeans particularly hard, hampering their ability to pay off their housing loans and monthly credit card bills. Their regular passive income was also adversely affected with the weakening economy putting stress on Singaporeans’ top sources of passive income – share dividends, interest income and rental income. Fewer Singaporeans said they were able to spend comfortably this year than last year.
“Increasing affluence and the availability of more financial planning tools and products to investors do not necessarily translate to financial wellness,” said Koh Ching Ching, OCBC Bank’s Head of Group Brand and Communications.
“We had hoped that the Index would improve from 2019, or remain the same, but the financial impact of COVID-19 on Singaporeans was undoubtedly reflected in the drop in the Index. In the face of the pandemic, Singaporeans are however also being prudent and saving regularly, while also putting aside adequate emergency funds that they can fall back on should they lose their jobs. If these habits stick and lessons are learned from the crisis, as Singapore and the region recovers from the pandemic, we expect to see a rise in the Index next year – perhaps even surpassing 2019’s result,” Koh added.
The Index launched in 2019 measures Singaporeans’ financial health using 10 pillars of wellness as defined by the bank’s wealth management experts namely savings habits, protection from financial emergencies, regular investing, retirement planning, regular reviews, gambling habits, excessive speculation, borrowing money, spending beyond means and manageable debt.
A total of 2,000 working adults in Singapore between the ages of 21 and 65 were surveyed online between 2 September and 3 October this year. To assess how each respondent fares on these 10 pillars, 24 indicators – standards and guidelines that are widely accepted best practices in financial planning – are used to derive an individual score of a maximum of 100.The resulting scores from all 2,000 respondents are then averaged out to derive the Index.
Many Spending Beyond Means, Borrowing From Friends & Family
With more pressing immediate financial worries at hand, Singaporeans are putting their longer-term financial goal of retirement on the backburner.
It is against this backdrop that a larger proportion of respondents admitted to often borrowing money from friends and family to get by. And with the volatile stock market this year, more people entered the market and have been excessively speculating for quick gains.
The tough economic conditions, however, did little to deter Singaporeans from trying to “keep up with the Joneses.” More admitted to have spent beyond their means to keep up with their peers.
Savings More To Create Emergency Funds
With the fear of further strain on personal finances and the uncertain future from the effects of Covid-19, Singaporeans are saving more; in their efforts to ensure they have enough emergency funds to weather any job loss; strengthen their ability to defray medical expenses; and ensuring that loved ones are well taken care of should they pass on. Improvements in these indicators buoyed the Index preventing it from slipping further.
Millennials Investing Earlier To Achieve More Faster
The younger generation of Singaporeans are the most worried about their finances. Compared to generations before them, the Millennials started investing earlier because of their strong desire to grow their wealth fast, even though many may not have the proper expert knowledge on investing.
Millennials’ top priority is to grow their wealth, yet 42% of them don’t know the best way to do so. Instead, many turn to online sources to research about investments and also rely on friends and relatives for information. About 4 in 10 Millennials who invest admitted that they speculated excessively in the hope of making a quick buck. Interestingly, Millennials are also the group which are most reluctant to seek professional advice on investments – only 26% of them do so compared with 33% of Gen X and 37% of Baby Boomers.
With their current situation still not stable, many Millennials are also not able to plan for their financial future. Only 57% of them have retirement plans compared to the national average of 63% and only 55% of them have planned for their loved ones’ finances to be taken care of after their death, compared to 67% of Singaporeans.
Women See Investing As Gambling But Some Invest Better Than Men
Women are less likely than men to invest – 40% of women do not have any investments, compared to only 25% of men.
This could be down to the fact that 38% of women think that investing is gambling, compared with 30% of men. Women also lack confidence in their financial knowledge and investing. But when women have the confidence, do proper research and seek advice from experts, their investments actually earn a slightly higher rate of return than men (4.5% a year compared to 4.3% for men).
With more women entering the workforce and still continuing to shoulder the bulk of household and caregiving responsibilities, it is not surprising to find more husbands (52% of married couples with investments) taking the sole active role in investments versus their wives (31% of married couples with investments). Only 17% of couples have both parties making investment decisions together. When this happens though, the investment returns were almost double that of couples with a single decision maker.
Singaporeans Underestimate Retirement Needs By At Least 30%
When asked how much they would need for retirement, based on their desired retirement age and lifestyle, the amount Singaporeans have in mind is insufficient – 4 in 5 underestimate the amount they need by an average of 32%.
They do not know that a more basic retirement lifestyle would still require about S$2,300 a month for an individual, while the higher-end of lifestyle choices require S$5,200 a month in today’s value. As many as 3 in 4 Singaporeans are falling behind in making their retirement plans.
Knowing how much is needed is crucial for retirement planning.
“From the OCBC Financial Wellness Index 2019 and 2020, the message is clear – Singaporeans don’t have a good understanding of their overall financial situation and of their projected financial needs when they retire. This is especially difficult when there are multiple goals in life, competing for one’s financial attention,” Tan Siew Lee, OCBC Bank’s Head of Wealth Management Singapore, said: -/www.halaluniverse.net
