Singapore is becoming increasingly affluent as a wealth hub, but a general lack of financial planning by individuals could jeopardize their hard-won gains. 

Last year, the Monetary Authority of Singapore (MAS) reported that the nominal income (salaries not adjusted for inflation) of middle-income segment of society increased by 42% between 2011 and 2021¹. Meanwhile, the country’s ultra-high-net-worth population is projected to jump to 6,000 by 2026, a 268% increase over a period of 10 years². 

Singapore is ranked as the top place to do business, according to The Economist Intelligence Unit’s Business Environment Rankings. Singapore has cemented its position as a key destination for professional advancement, ease of doing business, and financial success. But amidst this rising prosperity, do people have sufficient planning to secure this wealth for the future?

Addressing the confidence-preparedness gap 

While there is rising interest in wealth planning in Singapore, many people are unprepared for unexpected events or financial shocks. Sun Life’s recently published Asia Financial Resilience Index revealed that a majority of Singapore respondents (70%) are optimistic about meeting their long-term financial goals, but only 23% are making financial plans on a five-year horizon or beyond. 

Even among Singapore’s most affluent respondents, many underestimate their expenditure levels or the benefits of building a long-term financial plan. Only half (48%) of high-income respondents are planning at least one year ahead, and even fewer (24%) are planning for five or more years ahead.

This goes to show that being wealthy does not automatically mean being financially resilient. Interestingly, high-income respondents show similar gaps in financial planning to their less affluent counterparts. 19% of high-income respondents spend beyond their monthly budget, while 22% of lower-income respondents do the same. 

The survey shines a spotlight on Singapore’s reality gap between confidence about financial goals and actual long-term preparedness. This is a blind spot that people of all income levels urgently need to address to avoid financial worries down the track. 

Getting started with financial planning

Financial security starts with a plan, no matter one’s age or income level. This requires greater financial literacy, as well as getting access to the right financial education. The same survey found that financial education was identified as a key desire by 39% of respondents, underlining the need for better access and professional help in financial management.

A financial plan, combined with holistic financial advice, is the best way that individuals can start to secure their affluence into the future. Individuals are able to access various publicly available online and digital resources to enhance their own financial knowledge, achieve their goals, and plan their long-term financial strategy.

Securing the future of the next generation

As individuals track their wealth journey, they also need to consider the current investment climate. Amidst an uncertain market landscape, there is now greater demand for wealth planning tools as investors seek to mitigate wealth erosion.

For example, insurance solutions have come to the forefront for succession and wealth planning. These provide an opportunity for individuals to diversify their portfolios, while at the same time obtain protection against unforeseen circumstances. In recent years, there has been a notable growth of interest in Indexed Universal Life plans amongst affluent and High Net Worth individuals. These plans offer investment returns that are linked to the performance of an index, such as the S&P 500 which is a widely recognised benchmark for the U.S. stock market, while also providing insurance protection.

Adequate protection is especially key when it comes to securing the future of the next generation. It is easy to fall into a false sense of security and complacency when times are good and day-to-day expenses are met. Financial security is also partly about preparing for rainy days in the future, in particular, about having the necessary resources to cope with economic or financial shocks which can arrive when we least expect them.

With greater financial planning, supported by widespread financial education, we think Singaporeans will more easily be able to secure a prosperous future for themselves and future generations. 

Contributed by:

Michael Wei

Chief Partnership & Marketing Officer

Sun Life Singapore