Dear readers, in today post, we will discuss a rather confidential question, that of how much savings should one have?
I believe while this question is confidential, this question is also an important one as many of us may have seen our savings reduced in recent months with the higher cost of daily necessities and mortgages. Against the backdrop of higher costs, it remains prudent to ensure our savings remain on track to meet both our short-term and long-term needs.
I have an excel spreadsheet that tracks all my daily expenditures and all the ins and outs of cash flow. My savings ratio (total amount saved over total amount earned including all active and passive incomes) is auto-computed by Excel formula. I can see that year-to-date, my savings ratio has headed south.
So, just how much a person should save?
Well, I believe this is question that has no right answer. I believe as long as what a person save can provide him with what he needs and wants in the short and long term, that ratio should suffice. Notwithstanding the above, it is always good to have a reference point to benchmark our savings.
According to the Monetary Authority of Singapore (MAS) Financial Stability Review 2022, an increase in household expenditure with the easing of Covid-19 related restrictions lowered the personal savings rate to 35% by the third quarter of 2022, from a peak of 40% in the first quarter of 2021. Hence I believe a good savings ratio for many of us is 40%.
And this 40% savings ratio seems a reasonable one, considering that this is also the figure that I have been reading about in relation to savings ratio.
With many of us contributing 20% of our incomes to CPF as salaried employees, 40% savings will be saving half of the 80% of what we earn, post CPF-contribution.
With the high fixed deposit rates these days, I would think this is a good opportunity for many of us to grow our savings through these fixed deposits too.
Have a restful and enjoyable weekends!
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