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Navigating Saving vs Investing in Singapore

Building a strong financial foundation in Singapore requires making informed choices between saving and investing your hard-earned money. While both are essential, they offer distinct advantages and disadvantages. As a Singaporean who began investing right after National Service (NS), I’ve personally witnessed the importance of understanding these differences.

Saving involves setting aside funds for future use, providing security and easy access. In contrast, investing offers the potential for long-term wealth growth through appreciation of your assets. Traditionally, investing required significant capital, making it less approachable. However, the landscape has changed, and Singaporeans can now invest with smaller amounts.

So, the question remains: saving or investing? To navigate your financial journey effectively in Singapore, it’s crucial to understand the key differences between these strategies and when each is most suitable.

Key Takeaways

  • Combined Approach: For a well-rounded financial strategy in Singapore, consider both saving and investing.
  • Emergency Fund First: Prioritize building a safety net with a 3-6 month emergency fund before venturing into investments.
  • Goal-Based Planning: Align your saving and investing decisions with your short-term (e.g., new gadget) and long-term goals (e.g., retirement).
  • Time Horizon Matters: Short-term goals (1-3 years) are best suited for savings accounts, while long-term goals benefit more from investment growth.
  • Risk Tolerance: Be realistic about your comfort level with market fluctuations. This will determine your investment choices.
  • Maintain Liquidity: Ensure easy access to funds for immediate needs while still pursuing long-term investment growth.
  • Start Early: The power of compound interest makes early investment, even with small amounts, very beneficial for long-term wealth building.

What is saving?

Setting aside money for future use is a cornerstone of personal finance, and saving plays a crucial role in achieving this. Instead of spending every penny you earn, saving allows you to build a cash reserve and lay the foundation for financial well-being. This could involve saving a portion of your monthly income towards specific goals, like a new phone costing $1,000 or a dream vacation in Bali.

A popular method of saving in Singapore involves depositing funds into savings accounts offered by local banks like DBS, OCBC, or UOB. While these accounts do offer some interest, it’s important to consider that they typically don’t provide compound interest. This can be a disadvantage when it comes to accumulating wealth over time. For a breakdown of high-interest savings accounts in Singapore, check out my guide to the UOB One Account.

What are the pros and cons of savings?

Saving money forms a crucial foundation for healthy financial management in Singapore. Financial experts widely advocate for building a strong savings habit. Singapore’s robust regulatory framework and stable banking system contribute to the low-risk nature of savings accounts, offering a safe haven for your hard-earned cash. This security provides peace of mind, allowing you to concentrate on your financial goals with the knowledge that your funds are protected.

Savings accounts also provide predictable returns. The Monetary Authority of Singapore (MAS) plays a vital role in maintaining financial stability, and interest rates on savings accounts typically fluctuate minimally in line with their monetary policy decisions. This predictability facilitates effective budgeting and financial planning.

Beyond security and predictability, saving serves as a cornerstone for achieving short-term financial goals. By consistently setting aside money, you build a financial buffer to tackle unforeseen expenses like car repairs or medical emergencies. This financial cushion provides peace of mind and safeguards your long-term financial well-being.

However, it’s important to acknowledge the limitations of saving. Interest rates on savings accounts are generally lower than inflation in Singapore. Over time, this can erode the purchasing power of your saved money. For individuals seeking potentially higher returns and long-term wealth building, exploring investment options might be a good next step. However, investments inherently involve risks, and consulting a qualified financial advisor is highly recommended.

What is investing?

Investing goes beyond simply saving for the future and entails putting your money into assets or financial instruments with the expectation that their value will grow in the long run. This can include purchasing stocks on the Singapore Exchange (SGX), bonds, mutual funds, or even Singapore REITs.

Investments are also one of the best ways to achieve long-term financial goals, such as a down payment on an HDB flat or retirement. Contributing to the Supplementary Retirement Scheme (SRS) and investing its funds to help boost your savings for your golden years is a prime example of investing in Singapore.

When I first started investing after completing my NS, I was intimidated by the process. However, I quickly realized that platforms like Interactive Brokers or Saxo Markets made it accessible even for beginners like myself. This early start not only improved my financial literacy but also gave me a head start in building wealth for the future. Also, many of such online brokerages also provide a lot of helpful and educational resources about investments. If you’re curious on how these online brokerages provides a much lower cost than traditional tools like POEMS and DBS Vickers, do check my guide on the truth behind zero commission trades.

What are the advantages and disadvantages of investing?

Investing offers a compelling path to financial growth in Singapore. A key advantage lies in its ability to diversify your portfolio. This means spreading your investments across different asset classes, such as stocks, bonds, and real estate. By doing so, you can mitigate risk by reducing the impact of downturns in any single asset class.

A great way to achieve diversification, especially for beginners, is through Exchange Traded Funds (ETFs). These are baskets of securities that track a particular market index. One popular option in Singapore is the Vanguard FTSE All-World UCITS ETF (USD) Accumulating (VWRA) (A beginner’s guide to the VWRA ETF in Singapore). The VWRA tracks the FTSE All-World Index, which provides exposure to a massive range of companies across developed and emerging markets. This instant diversification helps reduce your risk by not being overly reliant on the performance of any single company or region.

Furthermore, investing unlocks the power of compound interest. Imagine your money earning interest on the interest it has already generated. Over time, this compounding effect can significantly grow your wealth. A great resource to understand this concept further is my guide on compound interest in Singapore.

However, it’s crucial to acknowledge the inherent risks involved with investing. Unlike savings accounts, accessing your invested funds might take longer, requiring a longer time horizon. This means your money may be tied up for a specific period. Additionally, the stock market is inherently volatile, and there’s always the possibility of experiencing losses or fluctuating returns. Unlike a savings account, there’s no guarantee of positive results.

Invest or Save? Which is better?

For many Singaporeans, a crucial question arises: where to allocate their hard-earned money – savings accounts or investments? The answer, like most things in finance, isn’t a one-size-fits-all solution. It depends on a multitude of factors specific to you, including:

1. Your financial goals

When considering whether to prioritise saving or investing, it’s essential to set and evaluate your financial goals within the Singaporean context. If your objective is to build an emergency fund or have a safety net for unexpected expenses, saving is an ideal choice. This is because saving allows you to set money aside for a rainy day and provides a sense of security.

For instance, many Singaporeans aim to have an emergency fund that covers 3-6 months of living expenses. This could mean saving anywhere from $10,000 to $30,000, depending on your lifestyle and commitments. Such a fund can be crucial in Singapore’s fast-paced economy, where job markets can be volatile and unexpected expenses like medical bills can arise.

When I first started working, I made it a priority to build an emergency fund. I learned this lesson firsthand when I unexpectedly had a job offer rescinded during a planned career change. Without any income coming in, having a readily available emergency fund helped me navigate this challenging time. It provided financial security while I actively searched for a new job, ultimately preventing a significant financial setback.

However, if your aspiration is to maximise your wealth and achieve higher returns over time, investing is generally more suitable. Investing involves putting your money to work with the expectation of generating greater profits than what a savings account could offer.

In Singapore, this could mean investing in a variety of instruments such as Singapore Savings Bonds, ETFs tracking the Straits Times Index, or even venturing into the property market through REITs. These options offer the potential for higher returns compared to the interest rates offered by savings accounts, which typically hover around 0.05% to 1.5% per annum. (Do note the interest rate for savings account is quite high in 2023 & 2024 but we are seeing interest rates being cut.)

2. Time horizon

Your time horizon – the length of time you’re willing to hold onto your money – plays a crucial role in deciding between saving and investing.

If you have short-term needs or goals within the next few years, saving your money in a savings account is a prudent choice. It provides easy access to funds and ensures stability for emergencies or upcoming expenses. This is particularly relevant in Singapore, where short-term goals might include saving for a wedding (which can cost upwards of $30,000 to $50,000), a down payment for an HDB flat, or even setting aside money for your children’s education fund.

However, if your financial goals are long-term, such as retirement planning or wealth accumulation over many years, investing your money may offer a better opportunity for higher returns. Investments have the potential to grow your wealth over an extended period as it allows you to harness the power of compounding and benefit from the growth potential of various investment vehicles.

For example, if you’re a 25-year-old Singaporean planning for retirement at 65, you have a 40-year investment horizon. Over such a long period, even a modest annual return of 7% can turn a monthly investment of $500 into over $1.2 million, thanks to compound interest.

When I started investing in my early 20s, I focused on long-term growth by regularly investing in a diversified portfolio of ETFs and blue-chip stocks. While there have been ups and downs, the overall trend has been positive, and I’ve seen my wealth grow significantly more than it would have in a savings account.

3. Your risk tolerance

Knowing your risk tolerance is another important factor to consider when deciding between savings and investments. If you know how to start investing in Singapore, can accept the potential fluctuations and uncertainties associated with investment returns, and are open to embracing a certain level of risk in your financial endeavours in pursuit of potentially higher returns, investing may be suitable for you.

In Singapore, this could mean investing in a mix of local and international stocks, bonds, and REITs. The Singapore stock market, while generally stable, can still experience significant volatility. For instance, during the COVID-19 pandemic, the Straits Times Index fell by about 30% in March 2020 before recovering later in the year.

If you prefer a more conservative approach and prioritise the safety and predictability of your funds, savings accounts are a better choice. This is because savings accounts provide stability and assurance that your money will be preserved without significant fluctuations or potential losses.

For risk-averse Singaporeans, options like Singapore Savings Bonds or fixed deposits with local banks like DBS, OCBC, or UOB might be more appealing. These offer slightly higher interest rates than regular savings accounts with minimal risk.

4. Liquidity needs

If you have a need for immediate access to your funds or prefer the flexibility of having your money readily available, then savings may be the more suitable choice for you. This is particularly important in Singapore’s high-cost living environment, where unexpected expenses can arise quickly.

For instance, if you’re saving for a near-term goal like a down payment on an HDB flat or anticipating significant expenses like medical procedures not fully covered by insurance, keeping your money in easily accessible savings accounts makes sense.

However, if you can afford to have your money invested for a longer period without needing immediate liquidity, investing can offer the potential for higher returns and the ability to keep up with or exceed inflation. Singapore’s core inflation rate has averaged around 1.7% annually over the past decade, meaning that money kept in low-interest savings accounts is actually losing purchasing power over time.

I maintain a balance between liquid savings and investments. While most of my wealth is invested for long-term growth, I always ensure I have enough liquid savings to cover immediate needs and short-term goals. This strategy has served me well, allowing me to take advantage of investment opportunities while still having a financial safety net.


In conclusion, the choice between saving and investing in Singapore isn’t binary – most people benefit from doing both. The key is finding the right balance based on your individual circumstances, goals, and risk tolerance. As you progress in your financial journey, this balance may shift, so it’s important to regularly review and adjust your financial strategy.

Eugene Chai

With five years of financial experience (and maybe a few too many all-nighters fueled by cold brew and craft beer), Eugene tackles complex financial concepts and breaks them down for young adults. Featured on Investment sites and CNA's Money Talks, this self-proclaimed "Finance Whisperer" isn't your stuffy suit. He uses relatable narratives (think "adulting, but make it money") to turn numbers into your financial BFFs, guiding you towards smart choices with your hard-earned dough.

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