Empowering you with financial literacy early

It’s never too early to develop financial literacy, especially given the everchanging economic climate and outlook. Understanding budgeting, saving, and setting financial goals can empower you to make informed decisions and build a more secure financial future, and it’s advised to start that journey today.

As young adults, you are experiencing several financially dependent milestones like repaying student loans, building your career, all while navigating rising living costs. Nonetheless, there’s no better time to start honing your financial literacy skills. Here are some tips on how to start:

Start Saving Young

To no one’s surprise, a key aspect of financial literacy is developing the habit of setting aside savings. We live in uncertain times, from ever-increasing inflation rates to life-altering global events like the recent COVID-19 pandemic. The bottom line is that you need a rainy day fund prepared for these unpredictable challenges.

Saving money is relatively straightforward – just spend less. But if it were that easy, we wouldn’t be writing this! While the concept is simple, saving money efficiently requires consistent, disciplined habits. A good way to kickstart your savings is to create a separate savings account apart from your spending account. This ensures that the funds in your savings account are reserved for emergency.

Before opening a savings account, it’s wise to explore the additional benefits they offer. For example, the JumpStart account from Standard Chartered provides a competitive interest rate on your first S$50,000, with no minimum deposit or salary credit requirements. This makes it a great option for growing your savings in the long term.

Setting Financial Goals

We’ve all been there: you’ve diligently saved for several months, cut down on unnecessary expenses, and then suddenly find yourself overspending in the following month, rendering your previous efforts futile. This is a clear indication that you need to set specific financial goals. These goals can include personal finance targets, such as the amount you aim to have in your emergency fund or tracking savings for an upcoming concert.

To set effective financial goals, you’ll need to map out how and when you plan to achieve them. This might involve increasing the amount you save or cutting back on certain expenses. Ensure these goals include tangible action items and deadlines so that you have something concrete to work toward. It’s also important to set achievable goals; accomplishing smaller targets instils confidence and motivates you to keep going.

Over time, goals can change, so it’s essential to keep your financial plan updated to reflect your current objectives. This may include starting to invest for higher returns, reallocate your investment portfolio to target specific returns or shifting your focus to paying off debt. Despite your best efforts, setting goals isn’t foolproof, and you may encounter setbacks along the way. The key is to revisit your plan and strategise anew.

Managing Debts

Being financially literate reflects how we manage our debts. While debts aren’t inherently bad and can be necessary in some cases, problems arise when you fail to repay them on time. High interest rates, late fees, and finance charges can quickly snowball, leading to a never-ending cycle of payments. This includes various types of debt, such as student loans and the increasingly popular Buy Now, Pay Later (BNPL) plans.

There are several strategies to effectively manage your debt. First, incorporate your debts into your financial plan, allowing you to evaluate and trim your monthly expenses, such as cutting back on branded coffee or dining out, to pay off your debt faster. Prioritise your repayment efforts by focusing on the debt with the highest interest rate first and try to pay more whenever possible to settle your debts sooner. Above all, spend within your means.

If you find yourself struggling to keep up with debt repayments, it’s crucial to communicate with your bank, as they may assist you in restructuring your payment schedule. Additionally, there are three debt repayment programs available to help manage your repayments and consolidate your unsecured debts with participating financial institutions: the Debt Consolidation Plan, the Debt Management Programme, and the Debt Repayment Scheme. A word of caution – unpaid debts can negatively impact your credit score, making it harder to secure future loans for things like buying a home or furthering your education. Taking proactive steps now can help protect your financial future.