How Much Savings Is Enough?

This article was first published by Aspire.

Since young, our parents had always told us to save as much money as we can. Money can’t buy everything in the world but the sum of all the things we need in our lifetime require a huge amount of money. But how much is enough? To answer this question, we must first agree we are all saving for our retirement and family – basically financial freedom. Only then, we can work out an estimate of how much money we need.

Next, we must ask ourselves, “What kind of lifestyle would I want to lead? A life of luxury or reasonable comfort?” The amount of money we need to save is largely affected by our choice of lifestyle.

Luxurious… or just comfortable will do?

A luxurious lifestyle requires a massive fortune, which would only be possible if we were to be in the top income bracket of any country. Either that or we need to work for a very, very long time.

A comfortable lifestyle, on the other hand, would not require as much. But planning is key. As Benjamin Franklin once said, “If we fail to plan, we’re planning to fail.” The comforting truth is, many average people with average or above-average salaries at best can achieve financial freedom even before the retirement age.

To cite a local example, AK, a 45-year-old Singaporean blogger who have been investing regularly and managing his money prudently since his twenties, managed to amass more than $600,000 in his CPF Ordinary Account (OA) and Special Account (SA) combined. He is more than eligible for the maximum payout sum when his Retirement Account (RA) is formed, which is sitting at about $2,000 now – for life. This is not including his quarterly dividend payouts if he were to stay invested.

Other than his investments and CPF contributions, AK held an above-average salary at best, which puts him in the middle-class income bracket. Of course, if we were to include all his capital returns from the stock market, he might not exactly fall under the middle-class in terms of net worth. Despite his wealth, he doesn’t indulge in a luxurious lifestyle. Which is why he’s able to enjoy the comfort he has now and help other retail investors as a hobby.

Back to the matter at hand, how much savings is enough? There are several considerations we have to make. This list is not exhaustive, though, because it largely depends on the individual’s needs.


This might not come as a shocker but Singaporean households spend a lot on transportation (third biggest expenditure). This is not even including the cost of owning a car in Singapore. The petrol costs alone can be a killer. As if our public transportation isn’t expensive enough, right? Regardless of how we look at it, though, taking the bus or MRT will always be cheaper than driving a car. (This might not be true for others living outside of Singapore, though.)

With Uber and Grab gaining more prominence, the cost of paying for a private transport service instead of owning a car is more practical for our wallets. Besides, the value of first-hand cars plunges tremendously over a short period of time. That’s why some Singaporeans opt for second-hand cars.

Mortgage Loans

Ideally, we would want the house we’re living in to be fully paid for, at least when we reach our retirement age. Some Singaporeans make the mistake of upgrading their houses too soon. Some might buy a house so expensive, budgeting becomes a matter of life and death. In some cases, any unexpected events might land some Singaporean couples bankrupt, just because of the amount of money they have to repay the banks each month.

As such, we should only buy a house that doesn’t require us to take a loan we would struggle to pay. There is no hard-and-fast rule to how much of our monthly income should be allocated to paying off the loans. But we should definitely set aside at least 10 to 25 percent to savings to build our emergency fund, which brings us to the next point.

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Emergency funds

This is probably the most important factor to consider – money for the unexpected rainy days. Some even dub an emergency fund as “the money that makes us sleep well at night“. Regardless whether we’re saving for retirement, already retired or just starting out to work, this is important. We can save enough for retirement, calculating our monthly expenses and how long we expect our savings to last for the rest of our lives. But if we fail to set aside an emergency fund, something unexpected could send us right back to work. Or in the case of working adults, we will be debt-ridden.

The sooner the better

While retirement might seem really far away for Singaporeans in their twenties or thirties, we must take into consideration how much energy we have as age catches up. It doesn’t matter how fit a person is, our tolerance for fatigue as we grow older will reduce as well. The sooner we reach the amount we need for our retirement based on our chosen lifestyle, the sooner we can do what we love and lead a comfortable life with our family.

With these considerations in mind, we can have a better picture of how much we really need for our older years and financial freedom. According to Channel News Asia, Singaporeans think setting aside $1,200 to $1,500 per month (as of 2016) is comfortable. Of course, we have to take inflation into consideration about how much is “comfortable”. Depending on how luxuriously we want to live our lives, the amount might increase.

Taking $1,500 as a benchmark, we would need $18,000 for every year of retirement and $360,000 if we expect our savings to last us for 20 years (more if we take inflation into consideration). Naturally, the younger we want to retire, the more savings we need as well. So, how much would you need?

Shares Investment and its editorial arm, Aspire, believe that everyone needs financial literacy. We work towards achieving that goal by helping retail investors make more informed investment decisions by presenting well-researched data in condensed and relatable formats, across our websites, magazines and offline events.

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