Borrowing money has become a regular part of our lives. We have all borrowed money or taken out a small loan at one point in our lives, whether for a home, a car, education, or even everyday expenses. However, while managing debt repayments is a challenge in itself, an even bigger struggle for many borrowers is the ability to save money at the same time.
Saving money isn’t just a Singapore problem; it’s a global issue. Several interconnected factors make it difficult to build and establish a savings account while paying back money you owe.
The Saving Struggle: Why Borrowers Find It Hard to Put Money Aside
Many folks have a hard time setting aside money, whether for a child’s education, home purchase, or retirement planning. Financial experts all agree it is a worldwide concern, especially where inequality and lack of access to financial services are prevalent.
However, in a first-world nation like Singapore, why do people still struggle with putting money in their savings accounts? Let’s talk about a few factors that are common in Singapore, but also found in many places all over the world.
High Cost of Living
One of the biggest hurdles is the sheer cost of living. Reports and surveys consistently rank Singapore as one of the most expensive cities in the world.
Housing, whether you’re buying a Housing Development Board (HDB) flat or renting privately, takes a significant chunk of income. Transportation costs, including car ownership with those hefty Certificate of Entitlement (COE) prices, and public transport fares, add to the burden.
If you have kids, there’s education and childcare alongside the ever-increasing price of groceries. These high expenses leave very little room for saving after covering the essentials.
News flash: this isn’t a uniquely Singaporean problem. People around the world face similar pressures. Major cities across the globe grapple with rising housing costs. Inflation is impacting the price of everyday goods and services, squeezing the life out of household budgets everywhere. So, even if the specifics differ, the underlying challenge of balancing essential expenses with the desire to save is a shared experience.
Lifestyle Choices
Beyond just the basic necessities, many borrowers find themselves caught in the trap of lifestyle inflation.
In a place like Singapore, it’s easy to get caught up in the “keeping up with the Joneses” mentality. The pressure to dine out frequently, own the latest gadgets, wear branded clothing, and travel often can be immense.
This kind of lifestyle creep, where our spending habits increase as our income rises, can significantly hinder our ability to save. Even small increases in spending over time can add up, leaving less and less available for savings, especially when coupled with loan repayments.
And again, this isn’t just a Singaporean phenomenon. Social media and the constant exposure to consumer culture contribute to lifestyle inflation globally. We’re bombarded with images of the “ideal” lifestyle, which often involves owning the latest tech, wearing fashionable clothes, and experiencing exotic vacations. This creates unnecessary pressure to spend, even when our budgets are already stretched thin.
Unexpected Expenses
Another major obstacle to saving while repaying debt is the inevitability of unexpected expenses. Whether you live in Singapore or anywhere else in the world, life throws curveballs.
Medical bills, home repairs, job loss, and family emergencies can all disrupt financial plans and wipe out any existing savings. These unforeseen events can make it even harder to save while trying to meet loan repayments.
A sudden job loss, for example, could mean not only lost income but also the added stress of needing to dip into already limited savings to cover loan payments and other essential expenses.
Debt (Mis)Management
Finally, the way we manage—or MISmanage—our debt can significantly impact our ability to save. Many loans come with different repayment options, regardless if it’s with a money lender Singapore or a bank from someplace else.
Often, borrowers are tempted to make only the minimum payments, which seem manageable in the short term. However, this strategy can prolong the repayment period significantly and result in accruing a substantial amount of interest.
The more interest you pay, the less money you have available for saving. High interest rates on personal loans or credit card debt can be particularly crippling, making it feel like you’re constantly running uphill financially.
This is a global issue. The concept of compound interest, where interest is charged on both the principal and accumulated interest, can work against borrowers who are not aggressively paying down their debt. Different debt repayment strategies, such as the debt snowball method (paying off the smallest debts first for motivation) or the debt avalanche method (paying off the highest-interest debts first to minimize interest paid), can have a big impact on how quickly you become debt-free and how much you can save along the way.
Wrapping It Up
The struggle to save while repaying loans is a complex issue with multiple contributing factors. High costs of living, lifestyle inflation, unexpected expenses, and debt repayment strategies all play a role. While there’s no magic bullet, there are steps borrowers can take to improve their financial situation.
Creating a realistic budget, tracking expenses meticulously, developing a savings plan, and exploring debt consolidation options (if applicable) can all help. Ultimately, improving financial literacy and planning for long-term financial health are essential for navigating the challenges of borrowing and building a secure financial future.