Financial assets in currency and deposits
With an average personal savings rate of around 39%1, a culture of saving is deeply rooted in Singapore and for good reason. Savings presents a sense of security, serving as a buffer against setbacks like unemployment or emergencies, as well as inevitable life events such as retirement.
Digging deeper, the average Singaporean household holds about 33%1 of their financial assets in currency and deposits, according to government data. Meanwhile, investments in shares and other securities comprise ~20% of financial assets1.
Mobilising capital to help manage the impact of inflation
While having liquidity on hand for near-term expenses and emergencies is important, holding excess for longer-term goals like retirement may be suboptimal as inflation can diminish purchasing power over time.
If money’s nominal value does not keep pace with rising prices for goods and services, its real value or purchasing power declines.
For example, consider the return on 1-year Singapore Government Securities Treasury Bills (SGS T-Bills), rolled over annually. Over the last 20 years ending 31.12.2025, the annualised real or inflation-adjusted return of 1-year SGS T-Bills was negative, as illustrated below2 - suggesting a loss of long-run purchasing power.
Over the same period, asset classes such as equities and fixed income have delivered positive real returns that may help offset inflation. However, these gains come with volatility - real returns can swing widely between good and bad years and vary significantly across asset classes.
Finding a balance
Balancing near-term liquidity needs with long-term investing is critical. Liquidity can help cover spending needs, and provide an emergency buffer.
The appropriate allocation varies by individual, and is typically determined by personal circumstances, objectives and preferences. Still, some useful rules of thumb can help. The 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).
Investing may help offset inflation by preserving purchasing power and growing the real value of savings over time. A diversified portfolio across asset classes like equities and bonds may help smooth volatility while capturing income and growth opportunities.
Investing involves risk, so it is crucial to strike a balance that matches the investor’s goals, investment horizon and risk tolerance.