The Covid-19 pandemic and its resulting economic uncertainties has spurred Singaporeans to pay more attention to financial management, the latest OCBC Financial Wellness Index has found.

This year, the overall Index score improved to 62, up from 61 in 2020, when the world first started to grapple with massive changes from the unprecedented pandemic and the resulting economic slump. The Index score when the OCBC Financial Wellness Index first launched in 2019 was 63.

With 88 per cent of Singaporeans consistently setting aside at least 10 per cent of their salary for savings, and the average Singaporean saving a good 27 per cent of their salary, more Singaporeans are confident they can accumulate sufficient funds to overcome a crisis this year (53% vs 51% in 2020) and sustain themselves financially for six months if they lost their jobs (54% vs 52% in 2020). More Singaporeans are now better able to manage their debts, with fewer Singaporeans having unsecured debt compared to last year (24% vs 30%), and more able to pay off their housing loans (69% vs 62%).

Thus, despite the lingering economic impact of Covid-19, better financial habits and debt management have resulted in fewer Singaporeans feeling worried about their financial health this year (39% vs 41% in 2020). Half of Singaporeans also feel confident that the economy would improve in the next 12 months, compared to 43 per cent who felt this way in 2020.

Designed and formulated by OCBC Bank, the Index is based on 10 pillars of financial wellness as defined by the Bank’s wealth management experts. These include savings and gambling habits, regular investing, protection from emergencies, regular investing and financial reviews, excessive speculation, borrowing money, spending beyond means and managing debt.

A total of 2,051 working adults in Singapore between the ages of 21 and 65 were surveyed online between 17 August and 16 September this year. To assess how each respondent fares on these 10 pillars, 24 indicators – standards and guidelines that are widely-accepted best practices in financial planning – are used to derive an individual score of a maximum of 100. The resulting scores from all 2,051 respondents are then averaged out to derive the Index score.

Key takeaways from 2021 Survey

• Close to half of Singaporeans use digital financial tools and achieve better Index scores than those who do not

The Covid-19 pandemic and its restrictions on free movement – requiring people to remain at home to stay safe from the virus – accelerated digital adoption among Singaporeans. With many having to turn to digital apps for everything from food delivery to workouts, Singaporeans’ usage of digital banking and money management tools proliferated, too.

Against this heightened usage of digital financial tools, questions relating to the use of digital tools were included in the OCBC Financial Wellness Index this year to understand more about what people used such tools for, and how users fared on their financial wellness.

Close to half of Singaporeans (46%) have used some form of digital financial tools to monitor and track their budgets, expenses or investment portfolios, or plan and track their financial goals like retirement, buying a home or their children’s education.

The group that uses digital tools have a much higher Index score than those who do not use any – 65 compared to 59.

In particular, among Singaporeans who make use of OCBC Life Goals – a comprehensive retirement planning tool that simulates the amount required for a financial goal and offers a seamless product purchase journey and goal tracking – to make retirement plans, 58 per cent are on track with their plans, compared with 44 per cent who do not use a retirement planning tool.

Those who used digital tools achieved better financial outcomes across different areas:

• 94% are able to save regularly (vs 87% of those who do not use digital tools)
• 58% able to spend comfortably (vs 47%)
• 58% of investors achieved their investment target (vs 49%)
• 60% of those with retirement plans are on track (vs 44%)

Among Singaporean investors who use digital tools and seek professional financial advice, 63 per cent feel confident and knowledgeable about making investment decisions and 61 per cent are on track with their investments.

This contrasts with 42 per cent feeling confident and knowledgeable among those who use digital tools, but do not seek professional financial advice. Only about half (51%) of this group is on track with their investments.

Singaporeans who are digitally savvy are also more invested across all investment product types, including foreign stocks, REITs, ETFs, cryptocurrencies, bonds and structured deposits, than those who are less digitally savvy.

• Younger millennials are investing a lot more than before, and in a wider range of investments

The huge run up in the markets from the stock market crash of February 2020, when the Covid-19 pandemic struck markets hard, led to ‘FOMO’ (the fear of missing out) – resulting in millennials jumping on the investment bandwagon to benefit financially from the subsequent market rally. The historic low interest rates in the past year were another push factor. Millennials in their 20s recorded a 22-percentage point jump in those invested (86% vs 64% in 2020), the biggest change from last year compared to other age groups.

Capitalising on the acceleration of digital adoption among Singaporeans, digital investment platforms (including OCBC Bank’s) upped the ante with a wider range of investment options – offering customers increased selections of investment portfolios, increased asset classes available for purchase, lower minimum investment amounts and more intuitive digital user journeys – which made investing more accessible and less intimidating for young investors.  

Although assets such as Singapore stocks and unit trusts were still the most held investment products – 47 per cent of Singaporeans own Singapore stocks and 31 per cent own unit trusts, with no major change from 2020 – the Index found investors, particularly millennials in their 20s, increasingly going into more volatile foreign stocks and cryptocurrencies.

Millennials’ investments in Singapore stocks fell to 40 per cent this year from 43 per cent last year, while their unit trust investments fell to 29 per cent from 31 per cent last year. At the same time, 35 per cent of millennials invest in foreign stocks and 22 per cent invest in cryptocurrencies; these are higher than the average Singaporeans’ investment of 29 per cent and 16 per cent in foreign stocks and cryptocurrencies, respectively.

Millennials demonstrated their digital investment savviness, with more millennials investing via robo-advisory platforms compared to Singaporeans from other age groups. Overall, 15 per cent of Singaporeans leverage robo-advisory platforms to invest and grow their funds, while 21 per cent of millennials do so.

Yet, despite the keener interest in investing to grow their wealth, millennials in their 20s are not seeking professional financial advice enough, resulting in less of them achieving their investment targets. Fewer millennials rely on financial advisors (30%), seminars by financial institutions (18%) and bank analysts (19%) than those who turn to online articles (61%), family and friends (52%) and YouTube (54%).

Fifty-three per cent of the millennials in their 20s who do not use any digital investment tools, but who seek professional financial advice, are on track with their investments. Millennials who seek professional financial advice coupled with using digital investment tools do even better – 64 per cent are on track with their investments. The group with the poorest performing investments is millennials who use digital tools but do not seek any professional advice – less than half (45%) are on track with investments.

• More women are growing wealth for their own sake

Women, who had previously shied away from investments, showed marked improvement on this front. This year, 79 per cent of women have investments, compared to 60 per cent last year. Past Index surveys indicated women prioritised their family ahead of their own financial needs, but with financial institutions focused on education and awareness around elevating women’s financial wellness and enabling them to ‘do it all’, women have certainly taken heed.

Encouragingly, women are increasingly prioritising growing their wealth (56% vs 51% last year), and many are doing so through investments. Among the 39 per cent of women who rely on financial advisors or bank analysts for investment advice, more than half of them (55%) are able to achieve their investment targets. This is in stark contrast to the women who rely on friends and family (56%) or YouTube (35%), where less than half (46% and 43% respectively) achieve their investment targets.

For those who still do not invest, the most common reasons cited were that they found it too risky or too complicated, and that they did not know where to start. Some also still felt that savings alone would be enough for them to retire comfortably.

• Singaporeans are scoring better in retirement, and more are choosing simpler lifestyles for when they retire

The uncertainties of the global pandemic have motivated more Singaporeans to think of their future when they retire. More Singaporeans – 51 per cent – listed retirement planning as among their top priorities compared to 45 per cent last year.

Out of all the respondents, 66 per cent had made a retirement plan, compared to 63 per cent in 2020. The biggest growth was among those in their 20s and 30s, who have started making retirement plans earlier to give themselves more time to build up their retirement funds. 64 per cent of millennials have started planning for retirement, compared to 57 per cent last year.

The realities of the pandemic may have made Singaporeans more prudent about their dream retirement lifestyles. Out of three retirement lifestyles they could pick based on broad considerations of dining out, travel, car ownership, home ownership and so on, more people picked the most basic lifestyle – requiring an estimated $2,300 – compared to 2020 (40% vs 36%).

However, while retirement planning is back on Singaporeans’ radar, it is still a neglected area in their overall financial wellness. Many Singaporeans (81% vs 78% in 2020) are still underestimating the amount needed for their chosen retirement lifestyle by 31 per cent (32% in 2020).

OCBC Bank’s Head of Wealth Management Singapore, Ms Tan Siew Lee, said: “The Covid-19 pandemic and its drag on the economy has made many of us more aware of our financial situations. Being stuck in Singapore for over 18 months has possibly also made us review and take stock of our financial plans. What stood out in this year’s survey is how Singaporeans persisted in exercising healthier financial habits such as consistently saving, sticking to a budget and investing to grow their funds – perhaps in response to the Covid-19 pandemic – and these had a positive impact on our overall financial wellness.

“We can only hope that these good financial habits will continue to prevail, so we can continue to see Singaporeans’ financial wellness lifted in the coming years as we ease out of the pandemic. The Covid-19 pandemic has accelerated digital adoption among many Singaporeans, and we recognise that our customers have varied preferences and concerns when it comes to investing and planning their finances. Our digital solutions offer customers access to digital banking and investment tools while minimising their need to come into our branches.

“With our virtual wealth advisory service, customers are still able to get the same level of sales and wealth advisory via video conferencing, in place of face-to-face meetings at our branches. Our OCBC Digital platforms also allow customers to invest at their own convenience after doing their own research, by providing jargon-free investment information and investment purchase journeys that are simple and easy to follow.”