The average Singaporean household has more than a third of their financial assets in currency and deposits

With an average personal savings rate of over 30%¹, a culture of saving is deeply rooted in Singapore and for good reason. Savings provide a sense of security as it can act as a bulwark against unexpected setbacks such as unemployment or inevitable life events such as retirement.

Digging deeper, the average Singaporean household holds about 35%² of their financial assets in currency and deposits, according to data from the Department of Statistics Singapore as of 31.12.2023. Meanwhile, investments in shares and other securities form just around 17% of financial assets².

Mobilising funds to help manage the impact of inflation

While ready access to money is important for near-term expenses and emergencies, accumulating excess liquidity may not be optimal for longer-term goals like retirement, due to  the diminishing effects of inflation on the purchasing power of money³. 

As discussed in “What if … things keep getting more expensive?”, if the nominal value of money does not keep pace with the general rise in the prices of goods and services, then the real value or purchasing power of the dollar has diminished. 

As an example of this macro trend, consider the return on  1-year Singapore Government Securities Treasury Bills (SGS T-Bills), rolled over annually. Over the last 15 years ending 31.12.2023, the annualised real or inflation-adjusted return of 1-year SGS T-Bills would have been negative, as illustrated in the chart below⁴. This suggests a loss of purchasing power in the long-run⁴. 

Over the same period, various asset classes such as equities and fixed income have generally presented positive real returns that may help manage the impact of inflation. However, this comes at the risk of volatility, exemplified by the wider range of real returns over good and bad years, which can vary significantly across various asset classes. 

Finding a balance

Striking a balance between having sufficient funds to meet near-term needs and investing for longer-term goals is critical. Having sufficient liquidity serves as a cushion for near-term spending demands and as a safety net in the case of emergencies.

The appropriate allocation would vary from person to person, and is typically determined by one’s private circumstances, objectives and preferences, although there are some useful rules of thumb. Helpful information can be found in the Basic Financial Planning Guide published by the Monetary Authority of Singapore (MAS), in conjunction with the Association of Banks in Singapore (ABS), Association of Financial Advisers (Singapore) (AFAS) and Life Insurance Association (LIA). The following points from the guide are more directly related to emergency savings and investments:

Investing may help to manage the diminishing effects of inflation, preserving the purchasing power of money and growing the real value of one’s financial coffers over time. Furthermore, an investment portfolio that is diversified across various asset classes like equities and bonds may help reduce volatility while tapping into opportunities for income and growth.

Investing invariably entails some degree of risk, making it crucial to determine the right balance that aligns with one’s objectives, investment horizon and risk tolerance. 

Provided for information only based on market conditions as of date of publication, not to be construed as offer, investment recommendation or advice. Forecasts, projections and other forward looking statements are based upon current beliefs and expectations, may or may not come to pass. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated.

1. Source: Singapore Department of Statistics. "Personal Disposable Income and Saving: Fourth Quarter 2023." Published 22.02.2024.

2. Source: Singapore Department of Statistics, J.P. Morgan Asset Management. Data as of 31.12.2023.

3. Source: J.P. Morgan Asset Management. “What if … things keep getting more expensive?” Published 19.03.2024.

4. For illustrative purposes only based on current market conditions, subject to change from time to time. Not all investments are suitable for all investors. Exact allocation of portfolio depends on each individual’s circumstance and market conditions.