1. Try the 50/30/20 ratio

A common guideline recommended by experts is the 50/30/20 rule, where you allocate half of your salary to necessities like food and transport, 30 per cent to lifestyle choices like holidays or hobbies, and the remaining 20 per cent to savings or investments.

But on average, Singaporeans save more than that. According to the Department of Statistics, Singaporeans saved about 30 per cent of their income in the second quarter of 2023.

While there is no hard and fast rule on the right amount to save, you should make it a habit to start saving early. Good financial management will help you avoid issues like a problematic credit score, which could affect your ability to afford essential big-ticket items like a house down the road.

2. Secure your emergency fund

One of the most important things to do when you save is to build up an emergency fund.

In the event of a crisis such as a retrenchment or a serious illness, you may experience a sudden loss of income or be saddled with a large bill. This is when an emergency fund will help cushion the financial blow and tide you over for a while.

Typically, your emergency fund should be enough to cover three to six months of living expenses, including basic necessities like food, transport, utilities and phone bills.

To monitor how much you spend on such essentials, you can download an app to track your daily expenses. Once you work out how much you need to save to build up your emergency fund, break it down into how much you want to set aside each month. You can also automate your savings by creating a recurring transfer to a savings account.

Once you have secured your emergency fund, you can then start investing additional savings into financial securities, such as stocks and bonds. This will help you generate passive income, and make your savings work for you.

3. Set financial goals

Save with an end in mind. Think about near-term and long-term goals you want to achieve, such as purchasing your first apartment in five years or retiring by age 65.

First jobbers may not feel a sense of urgency to meet goals that seem far off. But small efforts to save early and consistently can add up to big gains in the future.

To get a sense of how much you will need to achieve your goals, use tools like this retirement calculator. Never underestimate the power of compounding interest – the chief investment weapon a young person has is time.

Setting clear financial goals and sticking to them doesn’t mean you can’t have fun along the way. Go on that road trip with your friends, indulge in that occasional splurge on your hobbies, and make worthwhile memories – just be sure to do it within your means.