Fresh graduates in Singapore often see themselves on the losing end: with only entry-level jobs in reach, and fast rising cost of living, the situation can seem unfair. However, we should look beyond pure income: youth provides some financial advantages, that a savvy young Singaporean can use to get ahead. Here are some of the subtle benefits of just starting out:
As fresh graduates have many more years to go, they have the benefit of time. They can save less than older counterparts, and still reap the same rewards. They can also provide they have the right emotional capacity – take on greater risks than Singaporeans closer to retirement, thus allowing for potentially greater rewards.
For example, consider a 25-year old graduate, who invests $300 a month for the next 20 years. Let’s say our graduate does this for 40 years, till she retires*. At a return of three per cent per annum, this comes to around $271,445 by the point of retirement. Conversely, let’s consider a 45-year old Singaporean, who only starts investing 20 years before retirement. This person invests twice as much ($600 per month), at the same return of three per cent. By the age of 65, this would come to around $193,461.
Just by virtue of having a longer time horizon, the younger Singaporean is able to accrue more wealth, despite committing half as much every month.
Due to compounding returns, younger Singaporeans can start saving or investing even with very small amounts – such that there’s no negative impact on their lifestyle – and yet still manage to hit retirement goals. However, this assumes the portfolio is well managed over the long term, and they stay disciplined.
Besides the effect of compounding returns, younger Singaporeans can take on higher risk, higher return assets. An example of this would be taking on more equities than bonds. While riskier, equities tend to outperform bonds (i.e., accrue more returns) over long periods.
While equities are more volatile, the unpredictability smoothes out over a long period such as 30 years. However, it’s young Singaporeans who can afford this length of time; older Singaporeans seldom have the risk capacity to sink so much into equities, as they can’t risk losses near their retirement.
*This is not realistic, as most people save much more when their income increases in later years; but just take it as an example for now.
With some rare exceptions, most young Singaporeans are not yet burdened with dependents. If you’re in your 20’s, for example, you may not yet be dealing with a mortgage, cost of a first child, parents who need financial support, etc.
This gives you greater leeway to switch careers if you have to, and find a job that’s a good fit. For example, older Singaporeans may find it tough to switch to a self-employed job, or to take on a job that requires extended training (e.g., a job with half-pay for the first year, because a training course is needed).
Some careers, sadly, are age-specific by nature. It’s quite unlikely that you’ll become a professional athlete, for instance, if you only start your sport at the age of 45*. Jobs such as soldering for SAF, or being a construction worker, also start to close off at certain ages.
As a young Singaporean, the world is your proverbial oyster. You have time to take on different jobs, and are probably able to switch with fewer consequences. If you become self-employed or a business owner, for example, you may struggle for the first few months to become stable: but you at least have the opportunity to take that risk, which you can’t later when you have a mortgage and family to feed.
Of course, this doesn’t mean you should blindly charge into just any job and waste your time either. If you’re interested in head start, and want proper guidance, reach out to us at Exodus Capital – we can help you explore a rewarding career in finance.
*Although admittedly, it depends on the sport. And while nothing is impossible, it’s fair to say it’s at least improbable, for most sports.
The chances of you making a financial mistake in life – be it in your career, business, or investing – approaches 100 per cent. Almost nobody goes through life with a flawless record of financial decisions.
Given this fact, age becomes a major factor in our risk capacity. You may notice, for instance, that older people tend to become conservative: many are less accepting of novel investment methods, or unusual career strategies.
This isn’t simply due to habits and comfort zones (although those play a part). It’s also because, for older people who are closer to retirement, wealth protection is more important than wealth accumulation.
In your youth, however, you’re less subject to this restriction. If you try out a job and fail at it, you have time to find another. If you start a business and it flops, you may have years in which to replenish your losses, and try again with greater wisdom. And with each renewed effort you make, you have a greater chance of success.
The key is to take advantage of this “leniency” that time provides: if you spend your youth refusing to try new career paths, or never stepping outside your comfort zone, then you squander your possibilities of success; and you could regret it when you’re older, and those doors close for you.
A younger Singaporean is more likely to understand TikTok or YouTube based marketing, for instance, or viral challenges and how to leverage off them*.
These provide avenues for promotions, side-businesses, and job postings that less in-touch workers can’t match. Even in creative industries, it’s more common for older employees to move to position of management and leadership (e.g., coordinating different artists), thus creating high demand for new, young talent.
Being in touch means you can communicate in ways older workers can’t: you have the right frames of reference, such as knowing the memes and in-jokes, to speak to wide demographics in the current market. This is a trait that can’t be easily taught or picked up.
As a young, fresh graduate, you might want to be proactive and explore how to use this for your employer. Alternatively, consider using it to fuel a side-business, or to market yourself if you’re self-employed.
*Usually, but not always. Some older Singaporeans are equally in touch, but they’re fewer in number.
When it comes to insurance of almost any sort – be it health insurance, hospitalisation insurance, or critical illness insurance – younger Singaporeans almost always pay less*. It’s a simple fact that youth brings better chances of recovery from ailments; and you probably have fewer conditions now than you would in old age.
This is not an advantage to take lightly. Those who take up insurance policies later in life can end up paying several times what they would have, had they bought the policies in their 20’s. Those who buy young may even finish paying all the premiums early in life (e.g., they finish paying all the premiums by the time they’re 45), thus leaving them protected for all their remaining years.
Talk to a qualified financial professional while you’re young, to take advantage of this.
At Exodus Capital, we’re committed to helping Singaporeans find more rewarding careers. Even if you’re a fresh graduate, we welcome you to contact us and explore rewarding possibilities (suggest link here); and to get a head start with proper mentorship and support.
*Depending on the level of coverage sought, and excluding atypical health conditions or impairments.
