Millennials in Singapore are in the phase of heavy financial challenges. From navigating the competitive property market to managing CPF contributions and dealing with rising costs of living to supporting family members, it’s essential to avoid financial missteps that can set back long-term goals. With Singapore's dynamic economy and peer comparison landscape, here’s a guide to help you avoid the more prevalent financial mistakes and make smarter decisions for your future.
1. Not Keeping Track of Monthly Expenses
The Mistake:
Many millennials still don’t track their spending closely, easily resulting in overspending on daily conveniences like dining out, online shopping, and transportation. This lack of awareness could result in exceeding your monthly income without realising it.
The Fix:
Start by setting up a detailed budget, categorising your spending into essentials like housing (HDB mortgage, rent), utilities, groceries, and transport (MRT, bus, taxi or car expenses) versus discretionary spending like entertainment, dining, and travel. Use apps or excel to track your expenses and monitor your financial health. With a clear understanding of where your money is going, you can make better decisions about cutting costs and saving more.
2. Relying Too Much on Credit Cards and BNPL Schemes
The Mistake:
Credit cards and Buy Now, Pay Later (BNPL) schemes can seem to offer convenience and reward points, but over-relying on these without fully understanding the repayment terms can lead to high-interest debt. Some end up spending more than they earn and accumulating debt by making only the minimum payments or deferring purchases via BNPL services without a clear repayment plan.
The Fix:
Be disciplined with credit card usage by paying off the balance in full each month to avoid accumulating interest. If you are caught in a debt cycle, focus on paying down high-interest debts first. Avoid using BNPL for non-essential items and treat these schemes like credit, setting a repayment plan and reminders to avoid late fees. Late credit card payment charges are just going to eat into your savings!
3. Not Saving for Retirement Early Through CPF Schemes
The Mistake:
Many Singaporeans delay planning for retirement, assuming that the Central Provident Fund (CPF) will be sufficient. While CPF is a great safety net, relying solely on it may not provide the lifestyle you want in retirement. Waiting too long to invest can severely reduce the benefits of compound interest.
The Fix:
Making cash top-ups or transfers from your CPF Ordinary Account (OA) to Special Account (SA) early allows you to take full advantage of the power of compound interest. The CPF interest of up to 5% p.a. can help you to grow your savings steadily.
In addition, consider Supplementary Retirement Scheme (SRS) contributions, which provide tax relief and investment opportunities. Start small by allocating a portion of your income monthly to your CPF or SRS and significantly grow your retirement fund over time.
4. Not Building an Emergency Fund
The Mistake:
Many people in Singapore focus on short-term goals like travel and lifestyle spending but neglect to build an emergency fund. This lack of a safety net can force individuals to dip into savings or take on debt when unexpected events like medical emergencies, job loss, or home repairs arise.
The Fix:
Establish an emergency fund that covers at least six months of living expenses. This should be kept in a separate high-interest savings account such as DBS Multiplier, UOB One, or OCBC 360, which offer competitive interest rates for regular savings. Start small with a fixed monthly amount and increase contributions as your financial situation improves. Having an emergency fund ensures that you won’t need to tap into long-term savings or rely on credit during financial setbacks.
5. Delaying Property Ownership Due to High Prices
The Mistake:
Given the high property prices in Singapore, some delay home ownership waiting for prices to come down or get a better deal. You could get lucky or the prices could increase further (just look at past and upcoming condo transactions). For example, CDL previews Norwood Grand at prices starting from $988,000 ($1,996 psf) for a one-bedroom plus study. This development is at Champions Way, off Woodlands Avenue 1. The last new private condo launch in the neighbourhood was 12 years ago - the Parc Rosewood, which was priced at $947 psf in 2012 and based on Edgeprop, its Historical High was S$1,556 psf in July 2024 for a 431 sqft unit.
The Fix:
If you are considering homeownership, explore government grants and schemes that help make purchasing more affordable. For example, the Enhanced CPF Housing Grant (EHG) and the Proximity Housing Grant (PHG) can reduce the cost of your first HDB flat. Do your research and plan for a down payment including your cash and CPF Ordinary Account (OA) savings. Property can be a valuable asset, especially in Singapore’s stable real estate market, so don’t dismiss this opportunity — owning a home can provide long-term physical and mental security too.
6. Neglecting Credit Score
The Mistake:
In Singapore, a good credit score is crucial for securing loans, especially for large purchases like property or a car. Yet, many millennials overlook the importance of building and maintaining a strong credit score, leading to difficulties in securing favorable loan terms or lower amounts (P.S even the number of active credit cards affect the amount of loan that can be taken).
The Fix:
Make sure you pay all your bills on time, including utility, phone, and any loan or credit card payments. Check your credit score through Credit Bureau Singapore (CBS) which has a record of your credit payment history, and take steps to improve it if necessary. Keep credit card balances low, and avoid opening too many new accounts at once. Building a strong credit score will make it easier for you to obtain credit and to qualify for loans.
7. Not Investing Beyond CPF and Savings Accounts
The Mistake:
If you rely too much on CPF and savings accounts, these may not be enough to generate the wealth needed for long-term goals. Given Singapore's rising cost of living, saving alone may not provide the returns needed to outpace inflation or fund early retirement. As your income grows with career advancements, allocate a higher portion of your increased income toward savings, investments, and debt reduction before indulging in an upgraded lifestyle.
The Fix:
Explore other investment options to grow your wealth over time. Consider fixed deposits, T-bills, bonds and Exchange Traded Funds (ETFs), or invest in blue-chip stocks through the Singapore Stock Exchange (SGX). If you are unsure where to start, consult professional advisors or attend investment seminars. Diversifying your investments beyond CPF can help you achieve higher returns while spreading risk.
By avoiding these common financial mistakes, you can build a more secure financial future. Whether it’s sticking to a budget, leveraging CPF contributions, or making smart investment decisions, taking proactive steps now can help you to achieve long-term success. Financial literacy and discipline are also essential to staying ahead and achieving your goals.
Master Your Finances Wisely,
Value Vaulter
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