Good Saving Habit

The habit of saving is a good habit to adopt. Many people believe that:
Income - Expenditure = Savings. That I think is a wrong formulation. The correction formulation should be: Income - Savings = Expenditure.

Set aside the amount you aim to save first before deciding how or what to spend on. This will make you more bias towards your savings portion. Which will inevitably force you to save more over time.

In my view, it is the least one should do once he/she starts to have an income. It is a habit that should be inculcated since young. Put the money that you want to set aside, at its very least, into the highest interest yielding bank one can find and is comfortable with. Get to know all the banks and saving products(SSB etc) that are available out there(esp their interest yields) so that you will have more options later on. You should always aim to save and have a safe & decent return at the same time.

Is putting your savings into equity investment like Reits counted as savings? In my view no. You are putting your savings at risk especially in this long period of market volatility and interest rate speculation. I would separate my funds into what is deem safe to me(capital guaranteed) and what is deem risky to me(equity investment).

Is sticking to the same bank for your saving needs permanently a good idea? In my view no. Because you could potentially lose out to better offers out there. Another reason not to, is that SDIC only insures $50k to each bank. So having more banks accounts with savings capped at $50k for each should technically reduce your risk(although local banks in my view are still very safe).

With that being said, I want to wish you guys a Happy SG50 National Day!


  1. Paying yourself first by saving is always good.

    Due to the evils of inflation one's 'risk-free' savings in banks will melt away over time like your ice-cream in Singapore's climate. I am afraid it won't retain its purchasing power = no capital guaranteed.

    Like so often in life we have to take a certain amount of risk to move ahead.

    If you save for the long-term, it might be beneficial to know that for an investor who made monthly investments of equal amounts into the Straits Times Index at the start of every month since the start of 1988, facing losses becomes dramatically reduced with a lengthening of the holding period.

    Having done this for 20 years and you would have incurred no losses. If you had done the same for only one year though you would have had losses in 41% of the years from 1988 to 2014. That is risky.

    Time is the best ally in building your nest-egg as long as you put it into the correct basket.

    1. Hi Tacomob,

      Yes a simple cookie cutter portfolio allocation is 110 - age = percentage into STI ETF. The rest into ABF Bond ETF. Readjust once a year every May. Seat back and you can potentially beat 90% of the mutual funds out there.

      This article of mine talks about the warchest portion. The portion where you want your funds to enter into capital guaranteed products.

    2. Ok, then I misinterpreted your header "Good Saving Habits".
      How big would you reckon should that warchest portion be? 6 months living expenses or more?
      Once that level is reached the 'savings'-portion of your formula should be channeled into slightly riskier but inflation beating investments. Otherwise the nest-egg will never grow.

  2. It depends on your portfolio and risk preference. I always believe in a well diversified portfolio. Make sure no matter your risk threshold, you should always have a portion for cash, bonds and equities. Tweak the percentage of each portion according to your goals. My view.