Aunties and uncles aren’t the only ones making bad financial decisions in Singapore. While the pioneer generation end up getting conned by scammers selling magic stones and there are actually people who “don’t believe in” credit cards, by many accounts the younger generation isn’t doing much better.
There have been numerous surveys like this one showing that young people are not preparing for or even thinking of retirement, preferring to prioritise everything else—homes, cars, the high life, plastic surgery procedures recommended by local bloggers, and so on.
Here are three bad financial choices too many many young Singaporeans are making:
Being careless about paying credit card bills
It’s not just people who cite shopping as one of their “hobbies” who have trouble paying off their credit card bills in full. Many young, affluent Singaporeans don’t always make the effort to pay off their credit card bills in full, even when they can well afford to. Some just “forget” to pay on time, while others pay the minimum sum because they don’t want to feel poor.
What these people are choosing to ignore is the fact that even if you pay the minimum sum, you still get slapped with hefty interest rates of over 25% on the amount still owing. And being careless about paying your bills on time will get you slapped with a late payment penalty, typically around $50.
Then there are the people who consistently face cash flow issues at the end of the month and don’t even have enough to pay off their bills in the first place. Don’t think these are all low income folks either. There are many well off Singaporeans who are mired in credit card debt. I know several well paid civil servants (not saying which ministries!) and bank executives in their late 20s and early 30s who still face these kinds of cash flow issues.
Blindly purchasing investment-linked insurance policies
Now, I’m not going to say investment-linked insurance policies are from the devil. For a small subset of people, it makes sense to buy this sort of product—these are people who actually need life insurance policies, and can accept the fact that these are risky investments.
The problem is that the vast majority of Singaporeans who buy investment-linked life insurance policies actually do so because their insurance agents have told them that it’s a great way to grow their money and force them to save.
Often, these people are young and don’t have dependents, and have no idea whether they really need a life insurance policy in the first place. All they are thinking about are the investment gains that the agent has hyped up. Unfortunately, if you only care about the investment gains and don’t need the actual insurance, investment-linked insurance policies are actually one of the worst ways to achieve them.
If you have no idea what signing up for an investment-linked insurance policy really entails, this has been covered elsewhere on MoneySmart.
Signing up for expensive gym memberships
More than half of my PMET friends who work in the CBD have gym memberships they pay over $100 a month for. So technically, I should be surrounded by six packs. But that’s not the case, because most of them hardly have the time to step actually into these gyms.
Many young workers get all excited about signing up for memberships and subscriptions without realising just how much it’s going to cost them in the long run. That $150 gym membership might not seem like much if you earn a salary of $3,000. It’s only 5% of your monthly salary, after all. But then you realise that you’re spending $1,800 a year, an amount that could buy you a holiday in Rome or Tokyo.
The worst thing is that after a while many people stop using their memberships altogether, but continue paying for them anyway.
Even if the gym doesn’t go the way of California Fitness, there are enough cheaper alternatives, especially for people who aren’t exactly working out multiple times a week. If you’re going to be fat and lazy, at least don’t let it cost you a cent.
What other bad financial decisions do young Singaporeans make? Tell us in the comments!