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Simple ways to save smart
Savings are essential in meeting both immediate needs and future goals. They cover immediate necessities such as food, housing, school fees, and medical expenses for you and your dependents. Savings also enable you to achieve medium- and long-term goals, like buying a home, planning a dream vacation, or preparing for retirement.
For those about to graduate or just starting their careers, understanding the key concepts below can help you stay on track on your savings journey.
Understanding income versus expenses
Income refers to the money you earn from work or investments. In Singapore, Citizens and Permanent Residents are required to contribute a percentage of their salary to the Central Provident Fund (CPF)1. The remaining amounts go into your bank account for daily use and savings.
Additional income may come from year-end bonuses, which are also subject to CPF contributions. Other sources of income can come from investments, rental property or insurance payouts.
Expenses refer to your living costs, including essentials like food and lodging. These are your needs. Non-essential expenses, such as entertainment, dining out, and weekend getaways are your wants.
Knowing your needs from your wants helps you to manage your spending within a limited income, so that your income consistently exceeds your expenses, allowing your savings to grow.
Create a personal budget
To keep your finances on track, start by determining your income and set a reasonable budget for your expenses. A common strategy is to save 20% of your monthly income. However, depending on your goals, you may need to adjust this percentage.
A simple way to visualise your budget is to use a spreadsheet, sorting expenses into categories like housing, transportation, personal expenses, education, and hiring domestic help. This allows you to identify areas where you can cut back spending and increase your savings.
To save money, compare prices across different merchants, take advantage of sales events, or shop at discount stores in your neighborhood. Thrifting has become a popular activity to help people sell what they no longer want for extra income. At the same time, others enjoy the opportunity to spend less when they buy used clothing and toys.
Remember to distinguish between your needs and your wants in order to control your spending and build your savings. You can also conveniently review your monthly cash flow using UOB TMRW.
Build an emergency fund
Aim to set aside three to six months’ worth of expenses as an emergency fund. This cushion helps you manage unexpected events such as job loss, medical emergencies, or urgent home repairs. Emergency funds can be kept in a low-risk savings account or Singapore Savings Bonds (SSB), which are guaranteed by the government and allow for penalty-free withdrawals.
Automate your savings
Develop a savings habit to build your emergency fund. Use UOB TMRW to schedule monthly transfers to your savings account, and make saving a set percentage of your income each month a priority. When you receive extra cash, such as government payouts or gifts, consider these a boost to your emergency fund.
To prevent unauthorised withdrawals, or even curb impulsive spending, use features like Money Lock on UOB TMRW to restrict access to your savings account.
Save smart
By practising disciplined spending and smart saving, you can build your savings to counter short-term emergencies and achieve long-term goals. This approach to financial planning sets a strong foundation for your future, ensuring that you are prepared for both expected and unexpected financial challenges. Remember, a dollar saved is a dollar earned!
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