5 S’porean millennials share personal finance tips for Gen Zs who are entering the workforce

Finishing school and entering the workforce is a significant milestone for most young Singaporeans.

Apart from being able to earn your own keep, starting work is also one of the many markers of independence, personal autonomy and a new phase in life.

While different people may have different ideas on how they spend their paycheck, most people will have similar concerns over things like financial security, financial freedom and even financial success down the road.

We spoke to five Singaporean millennials about some of the financial learnings they have gained since entering the workforce and the advice they have for other young Singaporeans.

Here’s what they shared.

1) Pay off your student loan and accumulate three to six months worth of savings at the same time

In 2020, I was in a work-study arrangement where I worked as I studied.

My priority at the time was to pay back my student loan as soon as possible.

It was tiring and required a lot of sacrifice, but I wanted to be debt-free as soon as I could because I wanted to be able to save up for the future.

While I was paying off my student loan, I made sure to accumulate at least three to six months’ worth of savings at the same time.

This is because I'm a firm believer of rainy-day funds in case a mishap happens and wanted to make sure that I wasn't living paycheck to paycheck in the event I lost my job.

Here’s how I proportioned my pay:

• Food and leisure (25 per cent)
• Parents (15 per cent)
• Personal savings (15 per cent)
• Student loan (15 per cent)
• Transport (10 per cent)
• Utilities, insurance and subscriptions (10 per cent)
• Tithing (10 per cent)

It helped that I was still living with my parents and did not have to worry about rent.

Michelle Chew, 26

If you are a first jobber looking for ways to be more disciplined about saving regularly, an endowment plan might be for you.

This is a product which provides both protection (eg. coverage for death and terminal illness) and the potential for you to grow your savings, with some plans offering a guaranteed sum when the insurance plan matures.

Take a look at Prudential's endowment insurance plans to save for the future.

2) Always buy insurance, especially if you’re a freelancer

If you don’t already have accident and hospitalisation insurance, purchasing them is crucial as soon as you enter the workforce and explore new interests.

I visited the emergency room (ER) on five occasions within a span of two years due to minor and major accidents.

Here are the accidents I endured:

• Fracturing my tibia at Judo
• Falling off a pull-up bar and getting seven stitches
• Going to the ER for stomach flu twice because I ate something wrong and puked the whole night
• Fainting from dehydration because I had stomach flu

As I was freelancing at the time and did not have any corporate insurance plans, I had to ensure that I was sufficiently covered on my own.

Having insurance provided me with a sense of security knowing that I would not have to dig into my savings for medical expenses.

My hospitalisation fees were also pretty high, so having a hospitalisation plan ensured that I could cope with these unforeseen and hefty medical bills.

If you are a freelancer, you’ll understand that no work = no income, so having insurance is doubly important.

Joni Sng, 28

If you are a Singapore citizen or permanent resident, you should have Medishield Life, a basic health insurance plan which helps to pay for hospital bills and selected outpatient treatments.

With inflation and rising healthcare costs, having a hospital plan is important to help cope with unexpected large medical bills.

Those looking for enhanced coverage can consider a MediSave-approved private Integrated Shield Plan (IP) such as Prudential’s PRUShield.

Prudential has an ongoing EasySwitch programme (till Mar. 31, 2024 at the time of writing) which allows IP policyholders to switch more easily from existing plans with other insurers to a Prudential hospital plan.

Note: Before switching or replacing an insurance policy, it’s important to review both your existing policy and new policy to compare the costs and benefits, to ensure that you are aware of the pros and cons before making the switch.

3) Consider an ILP if you’re looking for both investment and protection

I have an investment-linked insurance policy (ILP) that was signed for me by my aunt when I was in university.

For the uninitiated, ILPs are a type of insurance policy that provides both protection and investment.

If you're not a financially savvy person and don’t have time to actively invest, this is one of the options you can consider to grow your money and get coverage at the same time.

Here’s how it works:

• The premiums you pay for an ILP are invested in selected sub funds
• As ILPs offer flexibility, you can adjust your insurance coverage as well as investment by switching sub-funds
• You can also reduce or increase your insurance coverage, top up your investments or make partial withdrawals, subject to the terms and conditions of your policy

Having said this, ILPs are not for everyone as there are risks involved, so it’s important to evaluate the pros and cons carefully before taking it up.

For one, the value of your eventual payout depends on the performance of the funds selected.

Returns for ILPs typically begin accumulating value only after a few years, and these returns may or may not be guaranteed, depending on your policy terms.

You may also incur losses if you choose to surrender your policy early.

However, for the average person who wants flexibility and something that offers both protection and investment, an ILP is one option to consider, depending on your risk appetite.

Tan Guan Zhen, 28

For more information about ILPs, take a look at PRUVantage Assure or PRUActive LinkGuard.

4) Learn about bonds and make use of spare cash to do low-risk investments

When I first entered the workforce at 25, I was fairly content with making sure I budgeted my spendings and saved enough every month.

In 2023, however, it sunk in how many extra costs I would incur from preparing for marriage and moving into a new house.

The impact of inflation was a lot more significant last year too.

Hearing the advice of friends, I dabbled in short-term low-risk investments such as government bonds* with a tenure of six months to grow my cash.

I also put some spare cash in a low-risk savings account for the next 10 years.

If you are in a similar situation as me, you can consider fixed deposit plans with banks or other low-risk investments.

This will offer you much better returns than letting your money remain idle in a bank account and give you added assurance that you are doing something to combat inflation.

Daniel Seow, 31

*Bonds are issued by governments and corporations when they want to raise money. By buying a bond, you're giving the issuer a loan, and they agree to pay you back the face value of the loan on a specific date, and to pay you periodic interest payments along the way, usually twice a year.

5) Don’t buy into lifestyle inflation and be wise with how you use your credit cards

One great tip I heard on a podcast is to spend within your first paycheck, even when you get paid more over time.

It takes discipline but if you learn to be content with what you have, you'll have more leftover money to save or invest.

If you get a credit card, try to get one with attractive cash back or miles (depending on your needs) so you can save more over time.

It’s important to remember that a credit card does not mean free money, so only spend what you can afford to pay back every month.

Remember to track all your expenses closely so you don’t overspend or incur interest from late payments as well.

This includes the date you’ll get your statement, the payment due date, and whether there will be a credit card annual fee (if so, can it be waived).

One thing I did was to use an excel spreadsheet as well as recurring calendar events to remind myself so I don’t miss payments or incur debts.

If you have any debt, make sure to repay it in full and not just the minimum sum, as this can spiral and result in additional debt.

Nigel Chua, 29

Prepare yourself financially for life now

With Singaporeans leading longer lives and the cost of living steadily increasing, it is important to take steps to achieve financial security early in one’s career.

This will give you a stable base to prepare for milestones such as buying a home, starting a family and retirement.

In July 2023, Prudential commissioned a poll that surveyed 1,000 Singapore residents aged 16 to 29 who are still studying or working.

Like the five millennials above, young people in the Prudential poll said that they aim to achieve financial freedom via these methods:

• Prioritising building up savings (61 per cent)
• Growing wealth (49 per cent)
• Investing to make their money grow (41 per cent)

If you would like to learn more about how you can enhance your financial literacy and build your financial portfolio to prepare for life’s challenges ahead, speak to a Prudential financial consultant today.

This sponsored article by Prudential gave this writer useful tips on how to manage her finances.

Top images via Michelle Chew, Daniel Seow, Joni Sng, Nigel Chua and Guan Zhen Tan