Understanding the Generational Divide in Financial Success

SINGAPORE: There's a noticeable generational divide in how financial success is perceived, particularly in Singapore. Baby Boomers, born between 1946 and 1964, often regard the expectations of younger generations as somewhat unrealistic. In contrast, Gen Z—those born from 1997 to 2012—harbors ambitions for significantly higher incomes, motivated by soaring living costs and shifting priorities in life.

The pressing question remains: How much do young Singaporeans genuinely need to live comfortably today?

Survey Insights on Salary Expectations

In January 2023, a group of National University of Singapore (NUS) students were surveyed, revealing a wide array of expectations for starting salaries. Responses ranged from S$5,000 to S$10,000 per month, showcasing the aspirations of the youth.

Additionally, a recent poll conducted by answers.sg in November 2023, which involved 5,185 participants, asked Singaporeans what they deem to be a livable monthly salary for 2024. The findings were intriguing: nearly 30% (28%) believe that S$9,000/month is necessary for a comfortable lifestyle, while 34% opted for a range between S$3,000 and S$3,999.

Current Salary Landscape in Singapore

According to a December 2024 report from SmartWealth, Singapore's average median income—including employer CPF contributions—stands at S$5,197 monthly (about S$62,364 annually). When excluding employer contributions, the median drops to S$4,550 monthly (approximately S$54,600 per year). Notably, the median salary for the 15 to 19 age group is a modest S$1,580, escalating to S$3,042 for those aged 20 to 24, and hitting S$4,680 for the 25 to 29 demographic—where the majority of Gen Z falls.

In comparison, Boomers of ages 59 to 78 report a median salary of S$4,351 for the 55-60 age bracket, with those over 60 earning an average of S$2,905 monthly. Notably, while the income gap between Gen Z and Boomers is narrow, discrepancies in spending habits and priorities are stark.

Shifting Priorities and Rising Costs

Where past financial strategies favored saving for significant life events like retirement or home ownership, younger generations are gravitating towards what can be termed 'soft savings.' This approach prioritizes mental health, personal development, and making the most of the present, often at the expense of traditional savings methods.

Rising living expenses further complicate matters for younger Singaporeans. A 2024 Retirement Insights Report from Etiqa Insurance Singapore surveyed over 1,000 individuals and revealed that many younger residents are anxious about both the cost of living and job security. A staggering number of them feel overwhelmed by the complexities of financial planning.

Recent data released by the Department of Statistics Singapore from the 2023 Household Expenditure Survey highlights this concern: average monthly household expenditure has surged from S$5,163 to S$5,931 from 2017/18 to 2023, translating to an annual increase of 2.8%. Despite household incomes climbing at a faster rate of 4.1% annually, real estate prices stubbornly remain high. The median price of private homes soared to S$1.75 million in 2023, making housing less attainable compared to previous decades.

Salary Growth and Economic Realities

According to projections from the professional services firm Aon, salary growth in Singapore is anticipated to lag behind neighboring Southeast Asian countries. For families of four, monthly living costs (excluding rent) are estimated at S$5,386.1, while single individuals face monthly expenses of about S$1,491.4 without rent.

Interestingly, a significant portion of the recent poll participants (34%) regarded a salary range of S$3,000 to S$3,999 as livable. However, this does not account for rent, which is often the most significant expense Singaporeans face. The reality is that many young adults living on a single income may find such salaries unsustainable.

This financial strain contributes to the fact that 25% of Singaporeans have yet to start retirement planning. Key reasons include immediate financial pressures (38%), reliance on Central Provident Fund (CPF) savings (34%), and lack of sufficient savings (30%). Among seniors, healthcare costs remain a primary concern for 63%.

Conclusion: Navigating the Financial Future in Singapore

While concepts of financial comfort can be subjective, the increasingly challenging landscape of rising costs and evolving priorities leaves both frugal Baby Boomers and struggling Gen Z-ers attempting to navigate their financial futures. For young Singaporeans, the emphasis on boosting income and practicing sound financial management will be crucial steps toward achieving long-term economic stability in this ever-evolving financial climate.

Is this the new reality for Singapore's younger generation? It certainly seems that navigating the complexities of life in the Lion City is no small feat!