Boost your financial resilience

Boost your financial resilience

By Lorna Tan

If you’ve only got a minute:

  • The financial health of most Singapore residents has improved by the end of 2020.
  • But the lower income group continue to struggle and were depleting their savings in the last quarter of 2020.
  • Our experience of living within the constraints of social distancing due to the pandemic last year has taught us that it is possible to reduce discretionary spend when the need arises.

Amid encouraging signs of a post-pandemic recovery, the financial health of most Singapore residents has improved by the end of 2020. But the lower income group (earning salary of $2,999 and below) – which experienced a significant income decline (more than 10%) – continue to struggle and were depleting their savings in the last quarter of 2020.

These are some of the valuable insights we can cull from this crisis to help us plan for a more secure financial future. As economic conditions improve, so will people's financial situations. Yet, DBS’s analysis over the past year has shown that while some segments of the society have made concerted efforts in financial planning, there were many who have not been able to do so. For the less prepared, though policy support will be helpful in closing the gaps in times of crisis, it should never be a cure-all or a permanent solution. To better prepare for a sustainable financial future, rigorous and prudent financial planning should be a way of life for everyone going forward.

Macroeconomic data does not reflect the full impact of the Covid-19 crisis on people’s income, savings and spending. To ascertain that, DBS analysed anonymised and aggregated data insights from 1.2 million retail customers to examine the effects of the pandemic on individuals’ financial wellness. This second report No Storm Lasts Forever, which is based on data collated at end of 2020, is part of DBS NAV Financial Health Series. The first report in this series - Same storm, different boat - was published in August 2020.

Here are 6 key highlights and financial planning tips from the second report.

1. Financial health of Singapore residents has improved across the board

The share of customers who experienced a significant decline in income fell to 19% in December 2020, a 7-percentage points improvement as compared to 26% in May 2020. This reflects an improvement in the financial wellness of Singapore residents amid the recovery from the crisis. Among those affected, the extent of impact has also moderated.


Set up a robust and holistic financial plan to help you navigate through the uncertainties ahead and achieve wellness. Besides having adequate emergency savings to tide through rainy days and financial difficulties resulting from potential retrenchments and income losses, start accumulating wealth early, build passive income streams and/or continue to upskill to expand income opportunities via career progression and side hustles.

2. Sustainable support for lower-income group needed

The lower-income group remained the worst hit, accounting for about half (49%) of customers who experienced income degradation. That said, the share of low-income earners who experienced severe income loss (more than 50% income decline) improved significantly by 9-percentage points to 42%, up from 51% previously.

  1. Notwithstanding a turnaround in employment prospects, targeted policy support (e.g. mortgage deferment schemes) has played a crucial role in helping this group of customers reduce their monthly financial stress.
  2. However, there are signs that this group will continue to dip into their savings to meet their monthly financial obligations. It will remain crucial for policy efforts to support this vulnerable group, especially in helping them improve their employment prospects.


To save more, increase income via secondary jobs or side hustles while reducing discretionary/unnecessary spend. Set up a realistic budget to gain more clarity on your saving and spend patterns. Be more discerning between needs and wants and adopt a more frugal lifestyle. This will help you save more when your pay goes up over the years.

3. Middle-aged workers still feeling the squeeze

Middle-aged workers still accounted for the majority share of those who experienced income deterioration. In fact, almost half of those in this age group experienced income decline of more than 30%, though compared to the other age groups, middle-aged workers made the most significant progress during the economic recovery. A persistent increase was also observed in the unemployment rate of middle-aged workers. These findings suggest that this group will continue to face challenges, and therefore require sustained policy support.


The middle-age group, especially those who are fall in the sandwich class category, will require more help in their financial planning since they would have multiple financial responsibilities toward their children, parents and own retirement.

Ensure you have adequate insurance protection and a sound estate plan so that dependants can continue with their lifestyle should something untoward happen to you. Invest wisely with positive cashflows in suitable investments to achieve both short and long-term financial goals.

4. Pandemic prompted customers to save more

Emergency savings of all income groups rose amid the crisis and reached peak levels in June 2020, before tapering off gradually as economic conditions improved. For example, the emergency funds of customers who earn more than $10,000 peaked at an amount equivalent to 4 months’ worth of salary.

  1. However, the savings situation of those who suffered income decline appears to have worsened. As of December 2020, almost half of customers (47%) who experienced a significant fall in income had less than a month of emergency funds, up from 42% in May 2020.
  2. The lack of sufficient savings appears to be more pronounced in the lower-income group, as they are most likely to have dipped into their savings to weather the crisis. Policy measures aimed at helping this vulnerable group will remain crucial this year.


It is recommended that you set aside enough emergency funds to cover at least 3 to 6 months of expenses, and more if you have dependants. Doing so will enable you and your family to tide over rough patches and avoid the need to liquidate your investments at an unfavourable time and price. In addition, it is prudent to monitor your discretionary expenses and pay your bills in full promptly every month to avoid incurring additional fees.

5. Spending varied at different stages of pandemic

As the pandemic situation improved, so did the propensity to spend. From August to December 2020, spending steadily rose for all income groups. Expenditure in December across all income groups was significantly higher than that in April. More specifically, discretionary spending has picked up compared with spending on essential items as economic prospects improve.

This growth in spending could be due to several factors, such as a higher propensity to spend during the school holidays and Christmas period. After months of perceived gloom, there was pent-up demand for goods as consumers rewarded themselves. The year-end spike in cash outflows could also be due to top-ups to Central Provident Fund (CPF) accounts and the Supplementary Retirement Scheme to qualify for personal income tax reliefs. Indeed, the CPF Board saw a 40% y-o-y increase in CPF top-ups to $3bn under the Retirement Sum Topping-Up Scheme in 2020. In the last three months of 2020 alone, the Board saw a substantial increase in top-ups of $1.2bn.


Our experience of living within the constraints of social distancing due to the pandemic last year has taught us that it is possible to reduce discretionary spend when the need arises. Check out the Plan & Invest tab on digibank to help you keep track of your spending in different categories, make realistic adjustments, and set up a financial plan to achieve financial wellness. It is timely to use this period to inculcate a thrifty habit and learn to defer gratification for bigger future financial rewards.

Some of the challenges in transitioning pandemic-savings habits to the post pandemic world include the person’s money mind-set or attitude to money, exuberance, positive consumer sentiment and the perceived need to reward himself or herself after months of austerity.

Below are several saving strategies adopted during the crisis that can become long-term habits over time. This is partly because the new normal will see more people working from home for longer periods of time compared with previously.

They include:

  • Cooking and eating at home
  • Home entertainment
  • Bulk buys for household items
  • Cheaper brands
  • Group tuition
  • Self-care
  • Less consumption on cosmetics, apparel, and sun-care items
  • Online shopping
  • Restructure insurance such that you get same coverage at lower premiums
  • Restructure home loans to enjoy savings
  • Doing without gym membership, a car, or a domestic helper

CPF members are encouraged to top up their CPF Special or Retirement Account each year in January rather than in December to start earning interest earlier and reap the benefits of compounding. By doing so, you could earn 20% more interest on your savings in 10 years. For example, by topping up $7,000 annually in January for 10 years, you will get $17,100 in interest, compared with $14,000 if you made top-ups in December.

6. Potential “cliff effect” from the mortgage deferment scheme not a major concern

According to the bank’s data, only 8% of existing customers under the mortgage deferment scheme required a relief extension. This potentially alludes to a better-than-expected cash flow situation for most households, where the reduced monthly instalments are expected to cover interest and partial principal repayments for most individuals. Nonetheless, continual support for the vulnerable group – comprising individuals who experienced a bigger income degradation or lost their jobs due to the pandemic – remains imperative.

Furthermore, different groups of individuals have responded to the mortgage deferment scheme differently. While some individuals (~31%) have tapped on the scheme arising from real financial need (i.e., reduced or loss of income, cash flow difficulties during COVID-19), others may have been more savvy (~17%) in tapping the scheme to free up cash to put into investments. The remaining ~52% customers do not invest and have mixed characteristics; most of the customers have positive cashflow or a few months of emergency funds.


Affordability is key when it comes to buying a big-ticket item like property. So do your sums carefully and find out if you can commit to the mortgage payments over time, before signing on the dotted line. Lenders will assess your monthly income, debt, credit score and a variety of other factors to determine how much you can afford. For instance, financial institutions use the TDSR and MSR measures to ascertain your ability to repay the home loans, as well as an indication of your financial health.

It is also prudent to do your due diligence and empower yourself with information on government subsidy schemes and suitable mortgage packages that can offer savings. For those who have deferred their home loans, do note that interest will continue to accrue on the principal amount deferred, equating to a larger sum to be repaid, which places additional pressure on you when the moratorium ends. Consider how you can resume repayments when the relief measures end.

Some tips include reducing other debt obligations such as non-essential insurance payments and credit card loans to enhance your financial position. Approach your bank early for help if you have payment issues especially those who saw >25% income impact. Ask your lender for mortgage extension relief.

In the light of the low interest rate environment, you can also consider refinancing your home loan to potentially enjoy some savings. Do a cost benefit analysis and consider if you may be subject to penalties, subsidy claw back, legal cost, administration fees and a lock-in period.

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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.

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