Singapore consumers are optimistic about their local economy and personal finances but nagging inflation and gaps in financial preparedness among youth surfaced as pertinent issues in UOB’s latest flagship ASEAN Consumer Sentiment Study (ACSS) 2024.
Almost seven in 10 Singapore respondents (68%) said they felt positive about the current economic environment in Singapore, a 20-percentage-point surge from last year’s level, UOB’s ACSS 2024. Singapore was also 14 percentage points higher than the regional average.
Persistent inflation remained the foremost worry of ASEAN consumers this year, but there were marked drops in the levels of concern expressed by Singapore consumers for all financial issues raised in the 2024 study, probably a stamp of approval on the measures the government has taken to help the local economy weather the global economic volatility, such as the Assurance Package, CDC voucher and GST voucher schemes.
However, in a brand-new segment on financial literacy, ACSS 2024 found more than one in four youth aged 18 to 25 did not meet any of the rules of thumb identified by the Monetary Authority of Singapore (MAS) and financial industry’s Basic Financial Planning Guide (the Guide), indicating that more concerted efforts may be needed to boost their financial preparedness.
“It’s heartening to see improved sentiments of Singapore consumers this year, indicating that Singapore has done well to help us weather through the economic uncertainty in this region. Our youths in particular are the most optimistic about their financial futures, a sentiment any country would be proud to possess,” said Jacquelyn Tan, head, Group Personal Financial Services, UOB.
“However, ACSS 2024 has highlighted a need for youths to shore up their financial preparedness. We believe that they are taking positive steps, for example by setting aside sufficient emergency funds and investing for their future, but they require more help in insurance coverage and legacy planning. It is eminently possible for youths to enjoy finer experiences in life while safeguarding against unforeseen circumstances, and we are here to help our young customers achieve their desired lifestyles while building sustainable financial buffers for life’s uncertainties,” she added.
Recession fears recede in Singapore, consumers expect finances to improve in the near term
Singapore consumers’ economic optimism compared to the region stems from its tight labour market, evinced by a high job vacancies-to-seekers ratio with retrenchment numbers still fairly contained. Furthermore, Singapore’s growth momentum could strengthen in the second half of this year on improving external demand should key central banks in advanced economies begin or continue to lower their policy rates, lifting investment and consumption activity abroad.
The sentiment was also reflected in a 10-percentage-point improvement year-on-year in expectations of a major recession in the next year. The number of Singapore consumers expecting a major recession in the near term was also 12 percentage points lower than the regional average, with the latter remaining relatively unchanged from last year.
Singapore consumers were also more confident of their financial status, with 78% expecting to fare as well or better financially in the next year, a rise of eight percentage points from last year. Generations Z and Y were the most upbeat, with 88% and 81% expressing optimism respectively. At 73%, Generation X saw the biggest jump of 14 percentage points, while Baby Boomers were most subdued at 54%.
Rising inflation was still the foremost concern of ASEAN consumers with 63% of respondents indicating as such, followed by increased household expenses (58%) and a decline in savings and wealth holdings (52%). These levels were relatively unchanged from 2023, a sign of the intractability of these issues. Against the same set of financial issues, Singapore consumers appeared less worried than their peers in the region. The proportion expressing concern over rising inflation fell 16 percentage points to 55%, while those fretting over increased household expenses and declining savings or wealth holdings also dropped 12 percentage points to 52% and 47% respectively.
Support measures introduced in the Singapore Budget 2024, such as the additional tranches of CDC vouchers for households worth $600 and the 50% personal income tax rebate for this year capped at $200, went a long way to alleviate Singaporeans’ cost of living concerns. These come on top of pre-existing government support such as the Assurance Package and GST Voucher scheme to provide additional buffers for low to middle-income households against rising costs.
On a broader level, easing inflationary pressures from the highs of late-2022, coupled with the strong Singapore dollar which preserved the purchasing power of local consumers while keeping a lid on imported inflation, also gave Singapore an edge over its regional peers.
The top item Singapore consumers said they spent more on in the past year was utility bills (25%), with daily commuting and child education tied at second place (11%), and household groceries coming in third (7%). That said, there was a sharp drop in the number of consumers who increased spending for utility bills and household groceries, with the former falling six percentage points and the latter dropping seven.
Singapore consumers were also outspending their regional peers on experiential categories such as travelling for vacations, fine dining, concerts, events and festivals, with 43% saying they had increased expenditure on such items in the past year compared with the regional average of 35%. The top experiences Singapore consumers were willing to pay more for were entertainment events such as concerts and festivals, travelling for vacations and fine dining in that order.
Inadequate levels of financial preparedness among youth
A significant majority of Singapore consumers were not taking adequate steps to secure their financial future, with Gen Zs most at risk. In the new financial literacy section, the study polled consumers’ financial allocations based largely on rules of thumb outlined in the Guide, namely allocating three to six months’ worth of expenses as emergency funds, obtaining insurance protection for death, total permanent disability and critical illness, investing at least 10% of take-home pay for retirement and other financial goals, and making wills and CPF nominations.
The study showed that only 10% of respondents met three or all of the four rules of thumb, and 37% met two. Worryingly, 35% of consumers only met one rule of thumb, while 18% did not meet any. Gen Zs were particularly concerned, with 26% of them checking off none. While Gen Zs are relatively “new” to the workforce and may still be finding their financial footing, and many might be grappling with big-ticket expenses such as marriage and housing, their lack of adequate financial buffers against any life’s unexpected is a cause for concern.
Singapore consumers are well equipped in terms of emergency funds, with 60% having at least three months’ worth of expenses as a buffer for unforeseen events. Gen X fared the lowest with only 54% of them holding sufficient emergency funds, compared to Gen Y (62%), Gen Z (59%) and Boomers (77%).
In terms of insurance, Singapore consumers, particularly Gen Z, need to be better protected, especially in the areas of critical illness and death and total permanent disability. Only 37% of respondents said they had critical illness coverage, with the proportion plunging to just 17% for Gen Zs. For death and total permanent disability insurance, only 22% of Singapore consumers were covered, and for Gen Zs, just 13%. More alarming, more than one in 10 Gen Zs (12%) said they did not possess any insurance at all.
On investments, 56% of Singapore consumers set aside at least 10% of their annual income for investments. Encouragingly, Gens Z and Y were the most diligent, with 55% and 62% respectively abiding by the rule of thumb on investing, a positive indication that the young are paying due attention to preparing their finances for retirement and other financial goals.
In terms of legacy planning, half of Singapore consumers have made a CPF nomination, with the number shrinking to one in five (19 per cent) when it came to making wills. Likely because of their youth, Gens Z and Y were less prepared than their older counterparts, with only 29% and 43% having made CPF nominations respectively, compared to Gen X (64%) and Boomers (74%). For will-writing, only one in 10 Gen Zs and 15% of Gen Ys had done so. More worryingly, only one in four Gen X and 35% of Boomers had prepared wills, whether due to taboo or lack of proper knowledge.
