Generation Z, which is composed of individuals born after 1995, is frequently described as a generation of “digital natives”. These young people have grown up with computers, mobile devices, social media and the Internet all close at hand. As a result, they’ve been exposed throughout their lifetimes to advanced technology and unprecedented digital connectivity.
Gen Z is also a generation that has watched their families grapple with increasingly uncertain worldwide economic conditions, financial crises and social upheavals. Witnessing these events has shaped this generation’s approach to personal finance in unique ways, giving them a surprisingly careful attitude toward spending, saving and debt. In Singapore, in fact, a recent study found that the majority of surveyed Gen Zs were much more financially savvy than their millennial counterparts.
Young people who are interested in improving their financial literacy now have access to an abundance of resources and tools to help them do so. It’s easier than ever to read up on money management, seek financial advice, and even do computations on a financial calculator online. If you’re a Gen Z Singaporean and would like to learn more about how to manage your money efficiently, consider trying the following essential tips.
Start Saving Young
Many people tend not to start saving until well into adulthood, but doing that means missing out on the compound interest you could earn over a greater number of years. It makes sense to begin saving and investing while you’re young, even if the prospect of retirement seems decades away. This gives your money more time to grow and will enable you to enjoy the many benefits of financial freedom much earlier in life.
A good number of young adults tend to focus first on what they intend to spend their money on, such as travel, entertainment and daily needs, then save whatever is leftover. Financial experts generally agree that this is not a reliable or sustainable way to build savings over time. Instead, try the opposite approach and set aside a certain percentage of your income to add to your savings each month. After that, determine how much you need to pay your regular bills. Whatever funds are leftover afterwards can then be safely designated as spending money.
Build a Good Credit Score
A healthy credit score is a telltale sign that you’re doing well financially. It can significantly improve your negotiating power, as well as increase your chances of being approved for higher credit limits, qualifying for loans and accessing loans with competitive interest rates. When you take on a loan from a bank, for instance, lenders will always look at your credit score first to assess your credit risk.
Singaporeans’ credit scores are numbers between 1000 and 2000, where lower numbers indicate a higher risk of defaulting on payments. The closer your credit score is to 2000, the lower the risk you’re perceived to pose to lenders and the higher the credit rating you’ll enjoy. And while lenders will naturally also be looking into other factors when making decisions, such as your employment history and annual salary, it certainly never hurts to have a good credit score.
Stick to Your Budget
Most people will start each month with lofty saving goals or budgeting plans, only to find that resolve faltering whenever they encounter a sale, discount or other opportunity to make an impulse purchase. To achieve your financial goals, however, you’ll have to develop greater discipline, even if it means forgoing certain wants and luxuries for the meantime. Practise buying only what you need, documenting your expenses judiciously and avoiding tempting spending opportunities like flash sales or promos.
Figuring out your real spending habits is key to being able to formulate a reasonable budget and actually live within that budget for a particular period of time. Be sure to log and consolidate all information on your income and expenses on whatever platform is most comfortable for you, whether this is a spreadsheet, a dedicated budgeting app or even a paper notebook. Take time to carefully go over the information in your log whenever you update it and make sure that all values are calculated correctly.
Start an Emergency Fund
Unexpected challenges and life changes, such as vehicular accidents, sudden illnesses or natural disasters, may come with a hefty share of surprise expenses. The last thing you want is to be caught with limited money in dire circumstances, so it’s recommended you set aside at least enough funds to cover your daily needs for 3-6 months in the event of unforeseen circumstances. This financial safety net will prevent you from going into debt and can also be reinvested later if you end up not spending it.
Prioritise Quality over Quantity
Whenever you make a significant purchase, whether it’s something as expensive as a computer or as affordable as a T-shirt, it always pays to invest in high-quality products that will last you a long time. Choosing just a few good items rather than filling your shopping cart with things that you may not even want or need will save you not only money but time and energy in the long run.
Gen Z Singaporeans have their whole lives ahead of them, which makes it all the more important to cultivate good financial habits. If you’re smart about money this early, navigating major life developments further down the road like getting married, buying your first apartment, and even retiring won’t be a problem.