According to Ms. Tan, we can strengthen our financial literacy in three main areas, which must be done sequentially: budgeting, saving and investing.
1. Budgeting
The first step to managing our finances well is to track our monthly expenses and establish a budget.
“Tracking your spending gives you an idea of what you’re spending and highlights where you’re overspending,” Ms. Tan said. “Later on, it makes it easier for you to budget for different expense categories and have better control over your money.”
2. Registration
With budgeting in place, then it’s time to start thinking about saving. Ms. Tan noted that saving is especially important for rainy days: “Having sufficient savings can help us through unexpected and difficult circumstances such as retrenchment, a medical crisis or the death of a loved one.” .
Knowing how much to save is also important. Tan says saving enough to cover at least three to six months of expenses is a good guideline, rising to 12 months for those with more unpredictable income streams, such as gig workers.
As the saying goes, if you take care of the pennies, the pounds will take care of themselves. Savings accounts like DBS multiplier account and POSB Save-As-You-Earn Account can help you contribute to your nest egg by rewarding you with higher interest rates for reaching certain benchmarks, such as reaching a regular monthly savings threshold or crediting your monthly salary to the account.
3. Invest
Once you’ve secured enough emergency savings, it’s time to work harder on that saved money by investing. One of the main benefits of investing is that over time it can help mitigate longevity and inflation risks. According to Ms. Tan, it is essential that you understand your financial situation, your objectives, your risk appetite and the type of investment products available before you start investing.
“You can start small with a regular savings plan like the DBS Invest-Saver where you set aside a fixed amount each month to invest in a exchange traded fund and/or mutual funds. Using a robo-advisor like DBS digiWallet is also an option for fee-conscious investors who want reasonably priced investment advice*, as well as organized investment portfolios,” she said.
In the current environment of economic slowdown, rising cost of living and heightened stock market volatility, some investors are inclined to adopt a “flight to safety” approach, Ms. Tan shared. “Coupled with their increasing yields, low-risk cash alternatives like fixed deposits, Singapore Savings Bonds (SSBs) and Treasury Bills (T-bills) have become popular options among retail investors who wish to diversify their portfolios.
In addition to integrating these three basic concepts, it is important for people to systematically do their own research. After all, financial literacy is a lifelong journey. Ms. Tan said, “Everyone’s life goals and circumstances are different, which requires personalized approaches and solutions.
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