9 effective ways to save money in Singapore

Ever wonder why you're earning a good salary but your bank account still looks a bit sad? You might blame it on Singapore's high cost of living, but is that really the whole story? The real issue lies more with your ability to save.  Saving money can be challenging for many people, and almost half of Singaporeans don't have enough savings to cover six months of expenses. Despite this common challenge, we shouldn't have to just accept financial insecurity as the norm. Inflation, which erodes the value of savings over time, poses a significant threat. To counter these challenges, it's crucial to adopt the principle of "Daily Economy, Lifelong Security." This involves making sound financial decisions and spending habits daily to ensure stability and security for the future.

If you're eager to sharpen your financial skills and keen to learn how to save money in Singapore, read on. You’ll uncover some of the most efficient ways to spend wisely and invest soundly while building your nest egg through budgeting. When you’re conscious of your finances, you’ll not only reap greater returns on your investments but also make life richer with more informed financial decisions.

9 effective ways to save money in Singapore

1. Get your budgeting strategy in order

Budgeting is an essential first step for improving personal finance management and curb your spending habits. Budgeting is like planning, and as Sir Benjamin Franklin puts it, “If you fail to plan, you plan to fail”. A budget can help you control your daily expenditures, keep track of your spending habits, and stay within your affordable limits.

If you’re new to budgeting, start by understanding the various budgeting methods then select one that is most suitable to help you achieve your financial goals while still being able to afford life's necessities. 

The 50/30/20 rule

If you're looking for simple tips on managing expenses like food and transport in Singapore, the 50/30/20 Rule could provide a useful money saving framework for you to follow. The method simplifies budgeting by dividing monthly income into three broad categories:

• 50% for essential expenses
• 30% for non-essential wants
• 20% for savings or debt repayment

The beauty of this method lies in its simplicity to understand and implement. By keeping to this ratio, you can easily limit overspending and cultivate better saving habits.

The envelope system

This is like carrying multiple “Envelopes” of cash allocated for specific spending categories. Whenever you need to make a purchase, use only cash from the corresponding envelope. And no, you’re not allowed to use credit cards or credit facilities. Of course, you don’t need to physically carry envelopes of cash, you can always adapt the concept to modern-day e-wallets or digital payment apps for more efficient transactions.

Zero-based budgeting

Use this method only if you’re dead serious about getting your finances in order. It tracks every dollar you spend or save until your income reaches zero. No money is unassigned at the end of the budgeting period and everything must be accounted for. 

While such a budgeting method can be tedious, it is extremely useful for managing limited funds and identifying where to spend less. 

2. Set realistic financial goals

Before you start budgeting with the 50/30/20 rule and researching money-saving tips in Singapore, let’s not forget to set some realistic goals. Think about it: if you don't know where you're going, how are you going to get there?Whether you want to retire a millionaire or are quite content with half a million, you’re not likely to reach that net worth unless you set some realistic goals and roll out some action plans to achieve them. This step also requires you to scrutinise your financial health. Yes, it might be a painful process (if you find some unexpected gaps, ouch!), but getting real with your current financial status can help you make informed decisions that put you back on track.

TIP: Avoid setting goals haphazardly and make sure they are realistic and SMART:

• Specific
• Measurable
• Attainable
• Relevant
• Time Bound

Here’s how to use these five factors when setting goals:Assuming you are like most average Singaporean who thinks S$566,640 (Specific and Measurable) in savings is a sign of financial freedom, you’re most likely to reach that goal if you save S$1,733 monthly (Measurable, Attainable, and Relevant) for 27 years (Time Bound).

3. Identify where to cut costs

This is where you’ll hold a magnifying glass over all your expenses and decide on the must-haves and nice-to-haves for at least a month. While it might appear daunting, scrutinising how you spend your money can help you track your spending patterns and cut out unnecessary habits that don't align with your financial goals.

Differentiate between needs and wants

By keeping records of where you’re spending, you can readily categorise your expenses into needs and wants. You can also go a step further to examine each category and pick out any unnecessary spending you've incurred out of habit. 

Yes, everyone needs some nice protein to keep healthy but there is no need to stock up on Wagyu beef all the time. Do you really need to splurge on those Fiji bottled waters too? Some savings may not seem significant in the moment but they can accumulate into a tiny fortune when you multiply them through the years.

Reduce discretionary spending

Evaluate your discretionary spending habits and look for areas where you can cut back without sacrificing too much. This could mean cutting out Starbucks and choosing the more economical Toastbox. The secret is to find a sustainable replacement that brings you just as much satisfaction as what you're used to.

Look for ways to negotiate low fees for recurring expenses such as internet services, gym memberships, video-on-demand membership, and utilities. No one really needs Netflix, Disney Plus, and Amazon Prime all at once. 

4. Spot the best deals and discounts

It is quite unlikely to get free stockpiles of merchandise like those savvy shoppers in the American television series ‘Extreme Couponing’, but there are plenty of deals and discounts if you research hard enough. Here are some money-saving tips relevant to the Singapore market that’ll help you save more throughout the year:

Use cashback and rewards apps

Many cashback and money-saving apps are designed to optimise convenience and saving potential for users. Apps like Grab, Fave, and Shopback offer opportunities to earn cashback and discounts at countless retailers. Some apps even allow you to withdraw the cashback in cash.

These apps are popular amongst students in Singapore who are exploring how to save as they spend. Because many of them are not eligible to apply for credit cards with cashback features, these cashback apps are naturally the next best option.

Compare online and in-store prices

While in-store shopping allows you to get touchy-feely with your favourite things, online shopping, on the other hand, offers unparalleled convenience and cost effective  ease of price comparison.

Whenever you're tempted to purchase an in-store item for immediate gratification, count to 10 before pulling out that gold card. Then, whip out your mobile phone and do a quick price comparison on shopping portals like Shopee, Lazada, and Amazon before making any regrettable decision that may burn a hole in your pocket. Online shopping can sometimes be cheaper because online retailers have other objectives than in store retailers with fewer overheads and are more ready to transfer those savings to consumers. 

5. Make the most out of your credit card(s)

Don’t leave home without your cashback or air miles credit cards because they could be your tickets to a round-the-world trip! These credit cards allow shoppers to earn a certain percentage of their spending back as cashback rewards or air miles, hence increasing their purchasing power.

Because every cashback credit card has unique advantages and target audience, you should always select one that complements your lifestyle. For instance, if you're looking to save money on food and transportation in Singapore, consider using a card that offers this. The high percentage cashback on groceries and dining, as well as fuel discounts, means your piggy bank will never go hungry.   

Alternatively, learn from Pedro and Grace, the couple who earned a million air miles from credit card rewards and exchanged them for S$76,000 worth of air tickets. Select air miles credit cards that let you rapidly accrue miles. These cards even offer free travel perks like airport transfers and access to airport lounges so you can travel like royalty without paying a single cent. 

6. Automate your savings

This is a simple yet powerful strategy for building wealth, achieving your financial goals, and most importantly, beating those insatiable urges to spend beyond your limits. By enforcing a consistent plan to save a portion of your income, you can make faster progress toward your financial goals, without the need to have those frugal few days or weeks before you get paid. 

How much should you save each month? If you earn S$5,000 a month, applying the 50/30/20 rule means you should set aside at least S$1,000 (20% of your monthly income) for savings to prepare for retirement in Singapore.

Don’t forget to increase your savings proportionately when you get a pay raise. Over time, the compounding effect of regular savings can significantly boost your wealth accumulation.

Many popular savings accounts in Singapore facilitate automated savings. However, do note that you’ll have to deposit at least S$100,000 if you want to earn high interest between 3 to 4.5% per annum.

If you have a smaller stash, why not consider a flexible cash managed account.

7. Invest wisely

Investing may seem daunting for risk-averse folks, but it is a viable method to achieving financial independence (if done correctly). Besides traditional investment products like stocks, real estate, and bonds, low-cost options such as REITS, ETFs, Robo advisors, and Cryptocurrencies are gaining popularity amongst younger investors.

If you are willing to take a shot at investing, here are four basic steps that’ll guide you through it: 

Set your financial goals

Start by thinking about your short-term and long-term financial objectives. Consider what you want to achieve through investing. It may be a simple goal to make a certain amount over two years or a more long-term endeavour such as making enough to buy a home or fund your children's education 10 years down the road.

Determine your risk profile

Assess your investment risk level based on your income, age, and financial health. If you’re not sure where to start, speak to a financial adviser to get a risk profile assessment on your income and spending habits.  

This is an essential step because it helps you assess how much financial risk you are ready to face when trying to achieve your goals. An investor with a bigger risk appetite tends to yield more significant gains and losses, while one with a lower risk appetite enjoys smaller and more stable returns. 

Understand the common types of investments 

This is where you’ll research various types of investment products in the market that align with your risk appetite and financial goals. Investments like ETFs, bonds, blue chip stocks, and REITs may be ideal if you prefer passive or dividend-based investing. Cryptocurrency and Forex are suitable for those who love speculative trading. Unit trusts and insurance products are great for ‘hands-off’ investors who prefer minimum participation.

Diversify your portfolio to meet financial goals

Never go all in with one single investment asset. As a general rule, a young investor’s portfolio should comprise 70 to 80% equities or unit trusts and 10 to 20% of fixed income securities

As you get older, you may want to consider tweaking your portfolio considerably from wealth generation to protection. A typical portfolio at this stage should comprise 10% equities, 60% fixed income, and 30% cash.

8. Build an emergency fund

An emergency fund is not your savings. It is a cash reserve that is specifically set aside for unexpected expenses such as an unplanned car repair, medical crisis or job loss. It serves as a safety net that protects you from dipping into your savings prematurely.  

As a rule of thumb, the fund should be three to six months' worth of expenses. If you're unable to save the full sum right away, start small and set achievable savings goals to help you get there eventually. 

If you intend to use investments to generate emergency funds, do note that the instrument should be liquid and easy to withdraw since emergencies require quick resolution. Consider high-yield bonds like Singapore Savings Bonds (SSBs) or a high-return accounts without lock-ins  this purpose. Choose a place that offers steady returns and where you can withdraw your money anytime without a penalty.

9. Seek financial advice

If you’re absolutely clueless about how to get your personal finances in order, there is no shame in asking for help from a professional adviser. Look for qualified advisers who are licensed, certified, and experienced in providing financial advice to individuals and families. Check out the Monetary Authority of Singapore’s (MAS) website for a list of financial advisory firms.In addition to working with a financial adviser, seek out additional resources and tools to help you learn how to save money in Singapore. There are plenty of educational materials, workshops, seminars, online courses, budgeting apps, and personal finance websites that promote financial literacy.

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I am so happy to have shared these tips I have picked up along the way! Now that you have this comprehensive guide on how to save money in Singapore, there's no reason for your finances to be in the red anymore! The key is to mindfully and consistently follow these money-saving tips and invest wisely to grow your funds with a realistic finanical goal in mind. When in doubt, seek advice from an experienced professional or a friend who has successfully navigated similar challenges. This way, you can learn from their mistakes without paying the price.

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Disclaimer:

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