Many nations across the globe, including Singapore, are struggling to balance the healthy economy and citizens’ safety against COVID-19. The impact of the pandemic continues taking its toll in the financial markets, giving rise to a possible global economic crisis. In the context of being financially prepared, are Singaporeans ready for the looming scenario?
Singapore ranks high in the list of the most competitive economies in the world, offering a business-friendly regulatory environment for entrepreneurs. Its GDP growth is one of the world’s highest and ranks best in human capital development.
Is the pandemic weakening its financial health? GoBear’s latest survey revealed that Singapore got a 68% index score in terms of financial health. The result is above the 63% APAC (Asia Pacific) average and one of the highest among the four global markets surveyed. In terms of individual approach to finances, most Singaporeans adopt more self-reliant strategies to cope with the challenging times that threaten their financial stability.
The Singaporean government is also working to cushion the grave effects of the pandemic, which can include a recession if the virus continues to ravage the world. Prior to the spread of COVID-19 in the country, the government has already prepared a buffer fund worth 5.6 billion Singaporean dollars (equivalent to $4.02 billion) to cushion the impact to workers, businesses, and households.
Financial health refers to the state of the individual’s monetary affairs. It includes one’s income and expenses, retirement fund, savings, and more. The indicators of strong financial health are growing cash balance, a steady stream of income, good returns on investments, and rare changes in expenditures.
The survey used three pillars that comprise financial health to determine the actual versus perceived financial health scores of Singaporeans.
A. Financial literacy
It refers to the level of the respondents’ financial knowledge and how they apply it to create effective financial decisions in their lives. They were asked to describe their current financial knowledge versus other citizens in the country. The answers were used to find out the perceived financial literacy score of the market. All the respondents were required to take some financial concept quizzes to determine the actual financial literacy score.
Upon comparison of the actual and perceived financial literacy scores, Singapore ranked high in both categories. It indicates that Singaporeans understand the importance of financial products and investments, along with the most accurate estimate of financial knowledge. Singapore scored an overall 78% score on financial literacy.
However, despite the high score, 1/3 of the Singaporeans admitted that they still lack sufficient planning about their retirement, and 25% did not know how or when to start planning for it. About 40% of them also revealed that they do not understand the concept of financial optimization. The financial literacy score made up 50% of the overall grade of the survey.
B. Financial security
The next pillar is the individual’s financial security, which is 30% of the overall score. It determines how secure Singaporeans are when it comes to their current financial situation as well as their coping mechanism if they suddenly lose their jobs.
Once more, Singapore got the highest score of 60% for financial security. About 55% of the participants revealed that they have an emergency fund to cover their 3-6 month expenses. Some concerns also came up. Fifty percent of the Singaporean participants admitted that even after their retirement, they will still be paying a mortgage or debt, while 34% believe that they will be supporting their parents or children financially.
When questioned about the factor that hinders their financial security, 54% of the respondents said that their living expenses are outpacing their income.
C. Financial inclusion
This pillar pertains to the accessibility of financial products and services to participants regardless of their profession, background, and net worth. The Singaporeans scored 51%, which is more than the APAC average score of 48%. It is expected to continue rising as cash payment becomes less popular.
Financial products and services include online payments, e-wallet, PayNow app, and more. The upward trend of electronic payment modes is due to the Singapore government’s plan to be cheque-free in 2025.
The results of the survey displayed the strong and weak areas of Singaporeans, which can be used to improve the level of financial health. Being prepared against possible economic recession and crisis is important.
Using the data collected during the survey, here are ways that can help us improve our capacity to face and handle difficult moments.
1. Improve financial literacy
Becoming more knowledgeable about financial products and tools is the first step toward financial freedom. We need to keep improving, innovating, and studying the possibilities that can contribute to better finances. There are many online websites that discuss personal finance and wealth topics. Be sure to check them out to become more financially-savvy.
The survey revealed that our approach to investing remains conservative. We do not see it as a necessity to improve our financial condition. It’s time to change our mindset and consider our long-term goals.
2. Be more financially secure
Start planning for retirement, no matter what your age. A retirement fund will give us a sense of security during our old age. It is also necessary to save for an emergency fund that will cushion the impact of job loss, health issues, medical emergencies, and other life-changing situations. A good rule of thumb is 3-6 months’ equivalent to your monthly expenses.
3. Diversify your financial inclusion
Invest your hard-earned money in a portfolio of investments like mutual funds, stocks, and high-yield saving accounts. Do not put all your money into one investment product to avoid the risk of heartbreaking loss.
Coronavirus pandemic caught everyone by surprise. Countries all over the world are suffering from the economic slowdown. As the number of infection rises, fear of steady income and safety of the family become more apparent. At this juncture, it is vital to assess our financial situation and understand how financial products can help us protect ourselves in future situations. Knowledge will help us act with pragmatism and confidence, eliminating the fear of uncertainty.