If interest-free instalment plans make it easy to spend, digital tools make it simple to save

Asia's Tech News Daily

If interest-free instalment plans make it easy to spend, digital tools make it simple to save

To ensure that you save first and spend later, pay yourself first. Set aside a comfortable amount to save every month from your salary.

While the world has been dealing with the Covid-19 pandemic since last year, another problem affecting the financial health of Singaporeans has been gaining ground — buy now, pay later (BNPL) schemes.

BNPL refers to a split payment plan (similar to an instalment plan as most of us would know it) that buyers who may not own a credit card can leverage for their purchases. 

The schemes are offered online for purchases of what seems to be any product, including clothes and accessories.

The concept is to split a transaction into smaller repayment amounts over a specified period of time, making pricier purchases appear more affordable.

BNPL providers are currently not regulated, which means they do not need to check the age of the buyer, or that the buyer has a minimum income, which may lead to spending beyond one’s budget.

Overspending has never been specific to any demographic, though the young tend to get a reputation for over-indulging, perhaps due to their penchant for online shopping.

But not all young people are irresponsible spenders. For example, Ms Janet (not her real name) and her boyfriend have managed to save enough money over the past 20 months to put down a deposit to buy their own home.

Ms Janet’s father is quite amazed and proud that his daughter — who is in her early twenties and works in childcare — has been so prudent with her finances. He himself has never had much savings.

The way he tells it, at one point in his life, his parents had to rescue him from bankruptcy after he overspent and maxed out his credit cards.

In addition to having two cars, he always had to have the top-of-the-line refrigerator, the latest iPhone, and luxe holidays — fuelled by easy credit and interest-free instalment plans.

Saving yourself from the click and buy trap

So how do we emulate Ms Janet’s example of saving first, spending later, especially when it is so easy to click and buy online?

Pay yourself first, said Ms Lorna Tan, head of financial planning literacy, DBS Bank.

“With this approach, the priority is to save before you spend. Work out a comfortable amount to save every month and set aside this sum immediately when you receive your salary,” said Ms Tan

With this approach (paying yourself first), the priority is to save before you spend. Work out a comfortable amount to save every month and set aside this sum immediately when you receive your salary. MS LORNA TAN, head of financial planning literacy, DBS Bank

With online banking, you can automate this monthly transfer to take place after your payday, she said. By doing so, you can achieve your savings target even before you start spending.

Young adults can also make their savings work harder for them by using a personal deposit account that rewards them with higher interest when they transact with a bank in more than one way, said Ms Tan.

At DBS, customers can clock higher interest rates for their savings through the DBS Multiplier account by crediting their salary, using a DBS credit card and investing in DBS products like Invest-Saver. Moreover, fall-below fees are waived for first-time customers and those aged 29 and below.

If you are focused on setting aside a fixed amount of savings each month, the POSB Save As You Earn (SAYE) Account can be an option. With the POSB SAYE account, you can credit your monthly salary into a POSB/DBS account and select it as the debiting account for your monthly savings contribution — from $50 to $3,000 (in multiples of $10) — into the POSB SAYE Account. 

This gives you an additional 2 per cent per year interest on the amount that you decide to save monthly from your salary to help you achieve your financial goals, provided no withdrawals are made in the first two years of opening the account.

Paying yourself first

How much to save? The recommended guideline is to save at least 10 per cent of your monthly gross income, said Ms Tan.

For young adults entering the workforce, this figure is likely to range from $300 to $500, which is a manageable figure to aim for.

DBS data shows that customers in the 25 to 30 age group save between 10 per cent and 15 per cent of their monthly salary on average across all income ranges.

“This clearly indicates that our customers do have good financial habits and realise the importance of saving.”

As a rule of thumb, individuals should set aside three to six months’ worth of monthly expenditures as an emergency cash fund for rainy days. 

If your monthly expenditure is $1,000, you’ll need to set aside $3,000 to $6,000 so that your daily life will not be disrupted by unexpected events. 

This gives you a buffer in the event that you have to make unforeseen payments. It also avoids the undesirable situation where you may be forced to liquidate your investments prematurely, just to raise cash.

For those who have dependants or are gig economy workers, it is advisable to have six to 12 months of emergency cash set aside. It is prudent to invest surplus cash only after you have set aside your emergency funds and catered to your basic insurance needs.

Once you have surplus cash, you can think about how to invest.

It is not rocket science because banks like DBS have begun to democratise wealth management with the use of technology. This has made portfolio management services, which were previously the preserve of the rich, accessible to the masses.

The DBS digiPortfolio, launched in 2019, is a painless way to invest. While the minimum investment is $1,000, subsequent amounts are as little as $10.

In the bank’s Q1 results, DBS chief executive Piyush Gupta said that the bank has been “promoting the democratisation of wealth management by extending its offerings to retail customers”.

Retail customers comprise 15 to 20 per cent of DBS’ wealth management income. 

“We’re also seeing more digital adoption of wealth products in the first quarter, both for equities and unit trusts. Digital customers grew substantially more than non-digital customers,” he said.


Unchecked spending schemes under review

Earlier this year, buy now, pay later (BNPL) schemes came under scrutiny for how freely they were being offered online for purchases of just about any product.

In April, the Monetary Authority of Singapore (MAS) said it was reviewing BNPL schemes, the Straits Times reported.

“The potential benefits and risks for Singapore consumers have become more relevant,” said a MAS spokesperson.

“We are thus reviewing the appropriate regulatory approach for such schemes, and we have reached out to the industry to gather information on their BNPL business and developments in this space.”

The review will weigh the benefits that new payment models can bring to consumers and businesses, while also looking at how to discourage runaway debt. 

This is similar to how the total debt limit of a credit card is capped at 12 months of salary for someone whose annual income is below $120,000.

If a regulatory framework is needed, the MAS said it will be risk-proportionate and evenly applied across all BNPL providers to lower the debt risks for consumers.

The writer, an ex-Business Times journalist, has found it all too easy to click and buy when she reaches for her handphone, especially during her recent 14-day SHN quarantine.

7 tips to avoid overspending

  • Set up a realistic budget and savings/spend targets

  • Save before you spend and build an emergency fund

  • Do not fund a purchase with future income if you are often low in cash

  • Affordability is key when making buying decisions

  • Avoid temptations from online sales

  • Set realistic limits on your credit cards

  • Do not let your debt spiral out of control

This is the sixth of a seven-part series in partnership with DBS

Internet Explorer Channel Network
Asia's Tech News Daily
News Related

OTHER NEWS

One provision of the child tax credit that Democrats are fighting to make permanent may slash poverty by 19%

Mother Ladayna Jordan, left, leads her children, Alayna, Aedan, Aaliyah and Ahmier Davis, left to right, to the front door of Normont Elementary School on the first day of in ... Read more »

Things are looking up on the money side for Singaporeans: OCBC survey

SINGAPORE- After a year of pandemic-induced money struggles, Singaporeans are beginning to see a ray of hope about their financial affairs, says the third instalment of an annual survey by ... Read more »

If you don't get a 5% raise this year, you aren't necessarily taking a pay cut due to inflation. Here's why

HOUSTON, TEXAS – JUNE 09: Employees speak together at a Chipotle Mexican Grill on June 09, 2021 in Houston, Texas. Menu prices at the Chipotle Mexican Grill have risen by ... Read more »

The ‘Great Resignation' is altering the workforce dynamic — maybe for good

Sara Adamski Courtesy: Sara Adamski After the Covid-19 pandemic hit, Sara Adamski knew she had to make a job change. At the time, the 26-year-old was a cook in a ... Read more »

How to become an entrepreneur — while you're still in college

As the founder and director of two entrepreneurship-focused programs at Stevens Institute of Technology, Launchpad and iSTEM, I have overseen the creation of 12 officially incorporated enterprises, with many more on the way. It took about three years ... Read more »

From Buy Nothing to Freecycle, gifting groups help bolster budgets and build community

kate_sept2004 | E+ | Getty Images When Sherose Badruddin, 38, joined her local Buy Nothing group in Chapel Hill, North Carolina, five years ago, she did it purely to save ... Read more »

Will business travel be the same again?

(REUTERS) – The unprecedented halt to air travel during the Covid-19 pandemic cut planet-warming emissions, saved companies billions of dollars in tickets, and benefited staff who can lose weeks of ... Read more »

How to negotiate the salary for your first job offer

Getting your first job offer is exciting — joining the full-time workforce can mean a salary, benefits, and a path to financial independence.  But before jumping to accept an offer, ... Read more »

Here's what your monthly budget will look like if you retire with $750,000

There are an endless number of strategies that you can use to plan your retirement. Cashing out a set percentage of your investments every year once you retire can be ... Read more »

Ways to protect your health coverage from life's uncertainties

Manulife’s health and insurance plans, like LifeReady Plus (II), can help you plan for every stage of your life, with coverage that is customised to your needs. PHOTO: GETTY IMAGES ... Read more »

Here's the strategy this couple used to save $1.3 million and retire in their 30s

You've probably heard of “The Great Resignation” at this point. Justin McCurry was what some would call an early adopter. He and his wife planned to retire from their jobs ... Read more »

'We don't regulate euphoria,' says former SEC chairman Jay Clayton, who breaks down why social media will likely continue to influence investing

Jay Clayton speaking at the 2019 Delivering Alpha conference in New York.Adam Jeffery | CNBC Social media frenzies have encouraged retail investors to jump into meme stocks and certain cryptocurrencies, ... Read more »

Wealthy Singapore investors thinking of relocating family members: Survey

SINGAPORE – More wealthy Singapore-based investors are thinking of relocating family members either to the Republic or elsewhere than their peers in the region, according to a report out on ... Read more »

6 budget hacks to get your financial life on track

Getty Images The idea of making a budget may make your eyes glaze over. Yet it is fundamental to achieving financial wellness. “It's really hard to make any plan or ... Read more »

Envy Global's Ng Yu Zhi slapped with 18 more charges over billion-dollar nickel trading scheme

SINGAPORE – Businessman Ng Yu Zhi, who is embroiled in one of Singapore’s biggest investment fraud schemes, was slapped with 18 more charges over his role in a nickel trading ... Read more »

How billionaire Charles Munger got into properties

(BLOOMBERG) – Billionaire investor Charles Munger made a well-timed bet on suburban apartments in California – thanks to a neighbourhood teenager who showed up at his house with a Hebrew ... Read more »

Robinhood takes aim at college students

(NYTIMES) – Robinhood, the free stock-trading app with 21 million active users and counting, is about to hit the road for a college coffee house tour to drum up new ... Read more »

What has changed about the wealthy

Deck: Inheritors are shaking off the stereotype of the do-nothing trust fund kind Paul Sullivan (NYTIMES) – I began writing the Wealth Matters column in December 2008. The column was ... Read more »

Greenwashing threat grows with rise of sustainable investing

The growing threat of greenwashing in sustainable investing could result in resources and attention being diverted away from the world’s pressing sustainability needs. If you are among the growing number ... Read more »

As fears about inflation increase, here's how to protect your portfolio

Experts are sounding the alarm about inflation, and that has Americans worried about their retirement. Billionaire hedge fund manager Paul Tudor Jones told CNBC Wednesday that inflation poses a major ... Read more »

Suze Orman: Don't get a joint bank account. Here's how couples should budget their money

Money can be a sore subject in any relationship. Sharing bank accounts with your partner may make your budget issues even worse, according to Suze Orman, host of the “Women ... Read more »

The Great Resignation: Why millions of workers are quitting

Americans are leaving their jobs in droves. In August 4.3 million Americans quit their jobs. While some people have left the workforce entirely, job security and better pay are top ... Read more »

These are the top 10 retirement spots in the U.S.

Anya Berkut | Getty Images The Covid-19 pandemic has changed how many Americans view their retirement, whether it is pushing it back or starting it earlier than planned. Yet one ... Read more »

The Great Resignation may lead companies to offer employees financial wellness benefits

Pekic | E+ | Getty Images American workers are financially stressed and employers are starting to listen. Whether it is a response to the Covid-19 pandemic, the threat of losing ... Read more »

Signs of severe overpricing in key US markets

(NYTIMES) – The prices of stocks, bonds and real estate, the three major asset classes in the United States, are all extremely high. In fact, the three have never been ... Read more »

These homes are built with big 3D printers

A row of 3D printed homes in Nacajuca, Mexico. (NYTIMES) – Mr Pedro Garcia Hernandez is a carpenter in the south-eastern Mexican state of Tabasco, a rainforest-shrouded region of the ... Read more »

Retiring with $500,000: How much money you'll have in your monthly budget

Nobody wants to run out of money in retirement. Experts recommend taking up to 4% of your total nest egg annually in retirement as a way to make your funds ... Read more »

A majority of Hispanics aren't saving for retirement. Lack of financial knowledge is a factor, expert says

BraunS | E+ | Getty Images Many Hispanic Americans aren't saving enough — or at all — for retirement. More than two-third of Hispanic households aren't putting aside anything through ... Read more »

Here's how much your Social Security check will increase in 2022

Social Security beneficiaries will see a 5.9% increase to their monthly checks in 2022. That's much more than the 1.3% adjustment made for 2021, and the largest increase since a ... Read more »

3 lessons for first-time investors from a financial advisor

Individuals need to take control of their money, and while the pandemic upended the personal finances of many Americans, it also has made many more people aware of the need ... Read more »

Junior Achievement and CNBC host students to discuss sustainability, alternative energy and the health of the environment

Featuring the next generation of young leaders, CNBC and Junior Achievement explore the role of entrepreneurship, social enterprise, corporate social responsibility and the future of work while creating a more ... Read more »

Education Secretary Miguel Cardona says personal finance lessons should start as early as possible

There's a growing push for students to get personal financial education in high school. But, according to U.S. Secretary of Education Miguel Cardona, that might not be early enough. “When ... Read more »

Education Secretary Miguel Cardona on mask mandates, student loan forgiveness and financial education in elementary schools

Current Secretary of Education Miguel Cardona joins CNBC's Senior Personal Finance Correspondent Sharon Epperson to discuss his strategy on starting financial education earlier in schools, community college as a way ... Read more »

How financial empowerment helped one woman rise up from poverty

For poet and educator Jessica Helen Lopez, empowerment and financial knowledge go hand-in-hand. Lopez, who lives in Albuquerque, New Mexico, and was the city's poet laureate from 2014 to 2016, ... Read more »

Celebrity chef Guy Fieri: Put these 3 foods on your grocery list if you want to start cooking on a budget

Cooking at home can be an obvious choice for anyone tightening up their budget. But if you're not careful, you may find yourself cooking and eating the same dish every ... Read more »

The Straits Times Invest bags award for community investor education

SINGAPORE – Managing personal debt and building a retirement nest egg can often be complicated tasks for the man on the street to grasp, but these are some of the ... Read more »

Property no longer the best retirement investment in S'pore: DBS report

The DBS report also showed that the average property price per square foot has jumped 50 per cent since 2010. SINGAPORE – Property has long been seen as a pot ... Read more »

Banks cashing in on ESG bonds amid climate crisis

About US$750 billion worth of ESG-related bonds have been issued this year, compared with US$468 billion during all of 2020. (BLOOMBERG) – While many banks have been condemned for contributing ... Read more »

Future of work should mean working less

To limit work’s negative moral effects on people, we should set harder limits on working hours. (NYTIMES) – A dozen years ago, my friend Patricia Nordeen was an ambitious academic, ... Read more »

When frequent floods make insurance costly

A storm-damaged house at a busted levee on the beach after Hurricane Ida swept through early last month in Grand Isle, Louisiana. (NYTIMES) – Climate change is going to hit ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic