Why Your Savings Still Aren't Growing After All This Time

You may have a large salary, but if you have no idea how to manage it properly, you may as well not be earning anything at all. If you’re one of the many people who often ask themselves, “Why are my savings not growing?” then you’re not alone. Learning to manage money is one of the most vital life lessons, but not everyone gets the hang of it immediately. It all boils down to good and bad money habits, which have, surprisingly, taken a turn since the pandemic.

According to the wealth management firm AAM Advisory, most Singaporeans believed their savings diminished because of COVID-19, with 33 per cent saying their saving habits were affected, 25 per cent saving less, and 11 per cent losing their income altogether. However, the OCBC Bank Financial Wellness Index in 2021 found that the pandemic accelerated the adoption of digital banking tools, many of which help users manage their finances better. The research also found that 80 per cent of Singaporeans allot at least 10 per cent of their salary to savings. On average, Singaporeans save 27 per cent of their salary. 

In short, while the pandemic affected the majority of Singaporeans financially, the crisis also taught them vital lessons regarding savings. However, not everyone is lucky enough to be a part of that group. Some people need more help when it comes to growing their wealth. 

Why Your Savings Aren’t Growing

Savings are more than a money matter. Your mentality, which is typically affected by your upbringing, environment, and culture, defines how you manage your finances. Many factors can affect your money management skills (or lack of), but the first step to countering any bad habit is awareness. Here are the common excuses people tell themselves that make them unable to grow their savings. 

“Everything will be fine.” 

Optimism can be expensive. While being optimistic is good for your mental health, it’s not always the best mindset for your financial health. Too much optimism will make you think everything will be fine without considering the consequences of a pricey purchase or a huge credit card bill. A psychological study on household savings behaviour found that too much optimism can be associated with a 57 per cent decrease in savings for younger households and a 16 per cent decrease in savings for established households. Optimism is fine but in moderation.

“I’ll worry about it later.” 

If the pandemic taught you anything financially, it’s to have an emergency fund. Whether it’s a raging disease, a massive typhoon, or a recession, you never know when you might need backup funds to get you through a crisis. So if you are low on savings and think you should worry about it later, here’s a reality check – worry about it now and start taking action to solve it. 

“My salary is too small to save.”

Small salaries are a notorious reason people don’t save. Many believe you must have a salary threshold to start saving, which couldn’t be further from the truth. It’s time to reframe your thinking: savings is not a privilege or an option – it’s a necessary expense. According to author and financial planner Tanza Loudenback, you should consider savings as a payable, just like rent and insurance. Only instead of paying an electricity company, you’re paying for your future security. No matter how low your salary is, you can save if you set your mind to it. 

The misconception is that you need to be able to set aside hundreds of dollars to be considered “saving money,” but why are there piggy banks? Start small, and eventually, you’ll see your savings grow. Base your savings on a percentage of your salary instead of an actual amount. This way, it doesn't matter how much you earn.

“I have too many debts to save.”

Many people fall into the habit of using supposed savings money to pay off debt. While this seems like the fastest way to pay off your financial obligations, it’s safer for you in the long run if you separate the money going to debt repayment from the money going to your savings. As mentioned before, you don’t need to save a huge chunk of money for it to be considered savings. Even a little goes a long way. As you pay off your debts, you can gradually increase the amount of money you save as your repayments grow smaller. 

“There are too many expenses to track.”

Tracking all your expenses is hard, but only if you’re not adopting a tool or system to track everything. There are many budgeting apps in the App Store and Play Store to help you manage your expenses, and nowadays, mobile wallets have in-app budgeting tools to help you track your bills and expenditures. Once you get into the rhythm of using these apps, you’ll discover how easy it can be to see your cash flow and identify problem areas.

“I don’t know how much I should save.”

There’s no fixed number on how much you need to save. It depends on your lifestyle. After all, you can grow your monthly savings as your salary grows. If you have a specific purchase or financial goal, give yourself a time frame to earn that amount and calculate how much you’ll need to save to meet it. 

If your savings purpose is to build an emergency fund, you’ll need to save at least six months of your income to ensure financial security. And if you’re just saving for retirement or general long-term savings, you can follow the 50-20-30 rule, which says you must set aside 20 per cent of your monthly salary, with 50 per cent going to expenses and 30 per cent going to miscellaneous items. We’ll dive into that later. 

“I’m still young.”

Start them young. That should be the golden rule of savings. You can never be too young to start saving. The younger you start, the more money you’ll have by the time you’re 30, 40, or 50. What’s more is that your teens and 20s might be the best time to start saving because you don’t have hefty expenses to consider yet, like mortgages or school tuition. 

How to Grow Your Wealth

Once you’ve dealt with your bad money habits and rewired your mentality, then it’s time to start focusing on growing your wealth. You can accomplish this through several methods, such as experimenting with the best saving tips and finding new income channels. We will focus on four easy ways you can grow your wealth.

Set financial goals.

Give yourself aims to aspire for. Savings are pointless if you don’t have a specific financial goal. Understanding the importance of savings and financial goals fuels the motivation to meet your targets. You can start with smaller targets to test the waters, such as saving for a new gadget. Then you can build from there: a house, a car, or a holiday abroad. Setting expenses as a financial goal can make saving easier as there will be a tangible outcome. 

Saving for retirement or building an emergency fund can be harder as you won’t feel the results until the moment you need them. However, whether your goal is small or big, it will always require discipline. 

Learn to budget. 

Mastering the art of budgeting is the secret to managing your finances, but it can be confusing at first. Just imagining all of your expenses in a month can be overwhelming, but the best way to start is by listing all of your expenditures, and then dividing them as follows: 

• Fixed expenses
  • Rent or mortgage
  • Electricity
  • Water 
  • Internet and/or cable
  • Mobile phone plans
  • Building or village association dues
  • Renter’s or homeowner’s insurance
  • Medical insurance 
  • Life insurance 
  • Loan repayments 
• Variable expenses
  • Groceries
  • Cleaning supplies
  • Personal care items
  • Transportation and accommodation for travel
  • Pet expenses (insurance, vet bills, groomer fees, food)
  • Car expenses (insurance, car payment, gas)
  • Public transportation fees 
  • Credit card payments
• Miscellaneous expenses
  • Streaming platforms 
  • Gym memberships
  • Digital subscriptions (YouTube, Spotify) 
  • Food or grocery delivery services
  • Eating out
  • Movies, concerts, hobbies
  • Clothes shipping budget 
• Savings
  • Savings for retirement
  • Savings for travel
  • Savings for a big purchase

Here’s how to create a budget.

1. Calculate your net income.
2. List all of your expenses for the month.
3. Divide your expenses into the following categories: fixed expenses, variable expenses, miscellaneous expenses, and savings.
4. List the amount of each expense per month.
5. Adjust expenses as needed to fit your monthly income.
6. Examine your expenses and identify the items that you can spend less on, such as shopping. 
7. Prioritise important expenses such as savings. 
8. Settle on a budget you’re comfortable with. 
9. Track your expenses in a spreadsheet or budgeting app. 
10. Take responsibility for your expenses, and be disciplined enough to not go over budget. 
11. Revisit your budget regularly, and ensure you’re on track to meet your financial goals.  

Try the 50-20-30 Rule 

Once you’ve set a financial goal and established a general budget, you can take it a step further by trying the 50-20-30 Rule, which allocates 50 per cent of your savings to your expenses, 20 per cent to savings, and 30 per cent to miscellaneous purchases or things you need. This system gives even more structure to your budget and prioritises needs over wants. 

The benefits of the 50-20-30 Rule are that it requires minimal tracking, provides flexibility, and helps you understand your budget better. It gives you more of a bird’s eye view of your income and what you can afford. The 50-20-30 can help balance your budget, allowing you to save money without having to sacrifice the things that make you happy.

Here’s a perfect example of how you can use the 50-20-30 Rule:

Monica earns $3,500 per month after taxes. She allots 50 per cent ($1,750) to essential expenses, such as rent, bills, and insurance, then saves 20 per cent ($700) to build an emergency fund and save for retirement. Monica is left with 30 per cent ($1,050) for things she wants, like concert tickets, eating out, and shopping.  

Find other avenues of income.

Once you’ve set financial goals, you can either meet them by building your savings or finding other avenues of income. Here’s a quick list of 10 other income channels you can explore without leaving your current job: 

• Get a part-time job.
• Take on time-based projects. 
• Invest in stocks, bonds, or crypto. 
• Start a side hustle business, like a drop shipping store. 
• Buy a rental property and turn it into an Airbnb. 
• Try affiliate marketing. 
• Invest in high-yield items, like collectables or jewellery. 
• Flip retail products. 
• Write a book, and earn royalties. 
• Create an online course, then sell it.

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