More concerted efforts may be needed to boost the financial preparedness of youth in Singapore, according to the latest ASEAN Consumer Sentiment Study (ACSS) 2024 by Singapore-headquartered UOB, a leading Asian bank.
A new segment on financial literacy in ACSS 2024 found that one in four youth aged 18 to 25 did not meet any of the rules of thumb identified by the Monetary Authority of Singapore (MAS) and the financial industry's Basic Financial Planning Guide (the Guide).
Inadequate levels of financial preparedness among youth
A significant majority of Singapore consumers were not taking adequate steps to secure their financial future, with Gen Zs most at risk. In the new financial literacy section, the study polled consumers' financial allocations based largely on rules of thumb outlined in the Guide, namely, allocating three to six months worth of expenses as emergency funds, obtaining insurance protection for death, total permanent disability and critical illness, investing at least 10% of take-home pay for retirement and other financial goals, and making wills and CPF nominations.
The study showed that only 10% of respondents met three or all of the four rules of thumb, and 37% met two. Worryingly, 35% of consumers only met one rule of thumb, while 18% did not meet any. Gen Zs were of particular concern, with 26% of them checking off none. While Gen Zs are relatively "new" to the workforce and may still be finding their financial footing, and many might be grappling with big-ticket expenses such as marriage and housing, their lack of adequate financial buffers against any life's unexpected is a cause for concern.
Emergency funds
Singapore consumers are well equipped in terms of emergency funds, with 60% having at least three months' worth of expenses as a buffer for unforeseen events. Gen X fared the lowest with only 54% of them holding sufficient emergency funds, compared to Gen Y (62%), Gen Z (59%), and Boomers (77%).
Insurance
In terms of insurance, Singapore consumers, particularly Gen Z, need to be better protected, especially in the areas of critical illness and death and total permanent disability. Only 37% of respondents said they had critical illness coverage, with the proportion plunging to just 17% for Gen Zs. For death and total permanent disability insurance, only 22% of Singapore consumers were covered, and for Gen Zs, just 13%. More alarming, more than one in 10 Gen Zs (12%) said they did not possess any insurance at all.
Investments
On investments, 56% of Singapore consumers set aside at least 10% of their annual income for investments. Encouragingly, Gens Z and Y were the most diligent, with 55% and 62% respectively abiding by the rule of thumb on investing, a positive indication that the young are paying due attention to preparing their finances for retirement and other financial goals.
Ms Jacquelyn Tan, head of Group Personal Financial Services at UOB, said, “ACSS 2024 has highlighted a need for youths to shore up their financial preparedness. We believe that they are taking positive steps, for example, by setting aside sufficient emergency funds and investing for their future, but they require more help in insurance coverage and legacy planning. It is eminently possible for youths to enjoy finer experiences in life while safeguarding against unforeseen circumstances, and we are here to help our young customers achieve their desired lifestyles while building sustainable financial buffers for life's uncertainties. "
On the whole, Singapore consumers were confident of their financial status, with 78% expecting to fare as well or better financially in the next year, a rise of eight percentage points from last year. Generations Z and Y were the most upbeat, with 88% and 81% expressing optimism respectively. At 73%, Generation X saw the biggest jump of 14 percentage points, while Baby Boomers were most subdued at 54%.
UOB's ACSS 2024 surveyed 5,000 participants aged 18 to 65 years old from Indonesia, Malaysia, Singapore, Thailand and Vietnam. Of this total, UOB surveyed 1,000 consumers across Singapore.
The survey was conducted online from 14 May 2024 to 6 June 2024 in partnership with global management consulting firm Boston Consulting Group.
The survey broadly categorises respondents into four age groups, namely Generation Z (18 to 25 years old), Generation Y (26 to 41 years old), Generation X (42 to 57 years old), and Baby Boomers (58 to 65 years old).