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The Big Read in short: With small paychecks and high consumption, how are youths coping with rising prices?

SINGAPORE — As a fresh graduate who contributes to her household expenses, 22-year-old Chin Ching Peng was faced with a dilemma: Take up her ideal job as a copywriter, or opt for a role in an unfamiliar industry that would pay higher.
The Big Read in short: With small paychecks and high consumption, how are youths coping with rising prices?

Each week, TODAY’s long-running Big Read series delves into the trends and issues that matter. This week, we look at how youths, who are said to be particularly affected by inflation, are grappling with rising prices. This is a shortened version of the full feature,​ which can be found here.

  • While rising prices cause everyone’s wallets to shrink, inflation has been said to affect youths in particular because their wages typically do not increase as fast as the cost of everyday goods
  • In Singapore, the median monthly salaries of the younger age groups have gone up at a slower rate than the overall population in the past three years, with the increases between 2020 and 2021 outstripped by inflation 
  • From cutting down household expenses to taking on weekend side gigs, youths interviewed say they are trying to save up for their future, even as they try to maintain their lifestyles as much as possible
  • On whether youths in Singapore are particularly affected by soaring inflation, economists noted that it is hard to generalise as they are not a homogenous group
  • Nevertheless, for many youths, the soaring prices could mean putting off major purchases such as buying a home  
  • Experts offer tips on what to do when handling existing loans and to save money. They also said youths should also try set aside some money for investments 

SINGAPORE — As a fresh graduate who contributes to her household expenses, 22-year-old Chin Ching Peng was faced with a dilemma: Take up her ideal job as a copywriter, or opt for a role in an unfamiliar industry that would pay higher.

“Most jobs (as a copywriter) had a salary of $2,500 or $2,800… the only one that paid more than $3,000 was for a job requiring at least two years of experience,” she said of her job-hunting experience back in February.

Ms Chin eventually took on a job in a different industry, which she declined to disclose, earlier this month, earning between S$3,000 and S$4,000 before her Central Provident Fund (CPF) contribution.

For the National University of Singapore (NUS) graduate, having a higher pay is essential since she helps out with the family budget and her mother’s medical bills. All these add up to about S$1,400 a month, but she expects it to rise further as inflation continues unabated.

“Just last year, our groceries cost about S$200 a month… but now it's almost S$300 so we must cut back. For example, prices of some vegetables at the wet market have gone up by 30 cents or 50 cents,” she said, referring to her mother’s grocery expenditure.

She also has a student loan of about S$20,000, which she will have to start repaying once the bank contacts her.

To earn some additional income for her own spending and savings, Ms Chin does freelance copywriting, earning between S$200 and S$500 whenever she gets a project. She also plans to provide Chinese tuition during weekends.

And during her scarce free time, Ms Chin stays home instead, or chooses food-and-beverage outlets with meals costing under S$20 when meeting friends.

“Sometimes, I ask my friends if we can meet next week instead because I’ve used up my entertainment budget for the week.

“Because of inflation and taking on more household responsibilities since I’ve graduated, there’s a lot of things I can’t afford,” she said.

Ms Chin is one of the many youths aged 35 and under who have had to tighten their belts or adjust their lifestyles as the daily cost of living continues to rise.

For 30-year-old sales coordinator Joyce Chiu, cutting down on unnecessary spending is crucial for she and her husband to continue saving S$200 a month from their combined roughly S$6,000 income before CPF contributions.

With three children aged nine, seven and two, Ms Chiu has cut down on simple luxuries, such as ordering a drink to accompany her meal at work, to ensure they are able to pay for their necessities without eating into their monthly savings.

“We eat out less and have a stricter budget… we also reduced our weekly fast-food treat for the kids and now do it every two weeks instead.

“Everything has gone up by 1 to 2 per cent, but when we add up the increase and multiply it by the days and months, it’s about S$50 to S$100 difference each month if we do not cut down on our spending,” said Ms Chiu.

With three young children, Joyce Chiu has cut down on simple luxuries, such as ordering a drink to accompany her meal at work, to ensure the family are able to pay for their necessities without eating into their monthly savings.

Rising prices have been a major headache for many the past year, with headline inflation — which covers prices of all goods and services, including commodities like food and utilities — rising to 5.6 per cent in May, compared to the same month last year. This was higher than the 5.4 per cent in March and April.

Core inflation, which excludes accommodation and private transport costs, also hit its highest level in more than 13 years in May at 3.6 per cent year-on-year.

Inflation has been said to affect youths in particular because their wages typically do not increase as fast as the cost of everyday goods. Youths also tend to consume a lot of clothing and footwear and expensive electrical items.

While rising prices cause everyone’s wallets to shrink, inflation has been said to affect youths in particular because their wages typically do not increase as fast as the cost of everyday goods, according to a BBC report in May 2016. Youths also tend to consume a lot of clothing and footwear and expensive electrical items such as phones and tablets. 

In an article published in May this year, The Conversation, an Australia-based media outlet, noted that inflation often hits lower-income households the harder as most of their income is spent on necessities such as food, housing and electricity.

And youths tend to belong to the lower-income bracket since they earn less than their older colleague counterparts, whose pay has increased over the years.

With youths in Singapore finding themselves in a similar predicament with their overseas counterparts, many are thus forced to be prudent with their spending when their incomes — often not as high as their middle-age working colleagues — cannot keep up with ever-rising inflation.

Median monthly salary of youths in S'pore not catching up

According to the Ministry of Manpower (MOM), youths between the ages of 20 and 24 had a median monthly salary, including employer CPF contributions, of S$2,691 last year, down from S$2,730 in 2019.

For those who were 25 and 29, they had a median monthly salary of S$4,095 last year,  a mere S$14 more than the S$4,081 in 2019. Those aged 30 to 34 fared slightly better, earning a median monthly salary of S$5,222 last year, up S$25 from S$5,197 in 2019.

In comparison, the overall median monthly income in Singapore was S$4,680 last year, up S$117 from S$4,563 in 2019.

Official statistics also showed that between 2020 and last year, during the depths of the Covid-19 pandemic, youths’ pay increases were outstripped by inflation rate, further undermining their spending power. 

For the age groups of 20 to 24 and 30 to 34, their median monthly incomes shrunk by 3.6 and 0.81 per cent respectively during this period, while the age group of 25 to 29 experienced a marginal increase of 0.96 per cent. 

In comparison, the overall median monthly income in Singapore grew by 3.2 per cent. Last year, the Republic's headline inflation was 2.3 per cent.

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On whether youths here are particularly affected by soaring inflation, economists including DBS senior economist Irvin Seah noted that it is hard to generalise as they are not a homogenous group.  

Mr Seah said: “Anyone with a relatively lower earning power and slower increase in income compared to the vast majority of the population will be more vulnerable to the impacts of inflation… so these are typically the low income, the elderly and also, the youth."

He added: “But for youths who have just started working, some have less financial commitments, and the labour market has been very tight so there are more job opportunities. They may also be able to get better compensation packages, but this depends on their industry and jobs.”

Still, Maybank economist Lee Ju Ye pointed out that with inflation rising at the fastest pace in a decade, "this would likely be the first time youths below 35 years old experience living costs rising this high since the start of their working lives”. 

This would likely be the first time youths below 35 years old experience living costs rising this high since the start of their working lives.
Maybank economist Lee Ju Ye
While rising prices cause everyone’s wallets to shrink, inflation has been said to affect youths in particular because their wages typically do not increase as fast as the cost of everyday goods.

In particular, young property hunters or owners may feel the impact of inflation more keenly, said Mr Bernard Aw, economist for Asia Pacific at credit insurer Coface. 

“An important consequence of high inflation is tighter monetary policy that contributes to higher interest rates, which we are already experiencing in Singapore," he said. 

“If the trend of rising interest rates continues in order to contain inflationary pressure, this will impact youths who are searching for their first homes or those that have just purchased their homes with a bank loan.”

COPING WITH INFLATION: EAT OUT LESS, STAY HOME MORE

Some fresh graduates who are just starting to embark on their next journey in life are trying to tame the inflation beast in their own ways.

While the likes of Ms Chin have cut down on most of their expenses or taken on side hustles to bolster their nest eggs, others have chosen to dig into their savings.

Even some of those in their 30s, including those are comfortably making ends meet, are feeling the inflationary heat.

Financial adviser Kng Zhi Han, 34, makes between S$10,000 and S$12,000 a month, and puts aside at least 50 per cent of his income into savings.

But this comes with a price of its own — eating out less, and switching to using house brand items. Mr Kng, who is living with his parents, also has to pay for his monthly car loan and contributes S$500 to his household expenses.

“I need to drive a lot to meet my clients for work, but fuel prices have gone up,” he said.

While he would typically spend S$60 for a week’s petrol in January, the amount is now around S$80.

Mr Kng had considered moving out of his parents’ house to gain more independence and privacy. But with rents going up in the past few months, he is in two minds about whether the move would be worth the significant increase in monthly commitment on rent.

While the likes of Mr Kng grapple with issues like high rents, those with young children have other concerns to deal with.

While 29-year-old IT project manager Alex Goi makes between S$7,000 and S$8,000 a month, his two-year-old son’s expenses have risen significantly in the past few months. His wife earns between S$2,000 and S$3,000.

“Diaper prices have gone up because the brands now sell fewer pieces in a pack,” said Mr Goi, noting that his son’s diapers now cost S$1 each, double what it was a year ago.

He added: “Wyatt’s (his son) milk powder used to be S$80 a tin about five months ago, but now it's S$100 a tin."

The rising cost of living— which had Mr Goi spending S$1,000 more in May compared to April — has spurred him to change his lifestyle recently.

The family now goes out once every two weeks, instead of weekly, on a budget of S$100, half of what they would have previously spent. They also cook more at home to avoid eating out. 

Similarly, Ms Chiu, the 30-year-old sales coordinator, has had to make sacrifices as her children’s expenses have increased.

She currently gives her two primary-school-going children S$4 a day, of which they are expected to save S$1 as she hopes to instill the thrifty habit in them.

“Now, I don’t know if they can save S$1 because they need to eat and will want a snack or fruit,” she said, referring to news last week that school canteen food prices were set to rise, after the Ministry of Education revised pricing guidelines in response to higher costs. 

With SP Group raising electricity tariff for households by an average of 8 per cent for the July to September period, compared with the previous quarter, it also means a S$20 to S$30 increase in monthly spending for Ms Chiu's household.

WITH PRICES OF EVERYTHING GOING UP, BEING PRUDENT IS KEY

According to the Singapore Department of Statistics, the Consumer Price Index for all sectors except communications increased in May year-on-year. The index measures the average price change for household goods and services commonly purchased over time.

Meanwhile, median mortgage rates in Singapore in May have nearly doubled compared with December last year. 

Two young homeowners told TODAY they had received letters from banks that their interest rates would be increasing, though they were not worried as they had budgeted enough for such situations.

Rents have also increased, with four tenants telling TODAY their monthly payment has increased by S$100 to S$300 this year.

Mr Pow Ying Khuan, head of research at 99.co, said that increased demand for rental units can be attributed to supply shortages due to construction delays and fewer homeowners willing to rent out their homes with Covid-19 still lurking everywhere.

Citing the 99-SRX rental indices, he said that overall condo rents had increased by 18.1 per cent in May year-on-year.

Overall, HDB rents have also increased for 23 months straight, climbing 16.2 per cent between May this year and the same month last year. 

Providing advice for tenants, Ms Christine Sun, senior vice president of research and analytics at OrangeTee and Tie, said that they can negotiate lower rentals by signing longer leases. As for property hunters, they can consider delaying their purchases as there will be “as many as 20,000 private homes will be completed in 2023, up from the 10,401 units this year”. 

Mr Ong Teck Hui, senior director of research and consultancy at JLL Singapore, said: “A major risk to homeowners is the loss of one’s job and income that would lead to a mortgage default. Therefore, it would be prudent to ensure a level of savings that can help towards mortgage repayments, at least for a certain period before one regains employment.”

Aside from homeownership, finance experts previously interviewed by TODAY in April gave some general tips that can help Singaporeans through the rising costs of living. Families, for example, can better keep track of household expenditure by reviewing their finances regularly.

WHAT TO WATCH OUT FOR WHEN TAKING LOANS

When it comes to refinancing loans to help families ease inflation-induced financial stresses, Mr Nelson Neo, head of home financing solutions at DBS Consumer Banking Group, said that while this is an option, homeowners should know the costs involved, such as the legal fees and valuation costs.

Noting that taking up a loan is a “significant financial commitment” over a period of time, Mr Anthony Seow, head of payments and platforms at DBS Consumer Banking Group, said youths should ensure they have the ability to repay their loan, and if possible, increase their loan repayments to lower their interest payable.

“Any late payment or repayment difficulties may be reflected in your credit score and records, and adverse records may impact your future financing needs,” said Mr Seow.

IS IT A GOOD TIME TO INVEST?  

Experts said that it is important for youths to start investing for their future, should they have enough savings on hand.

If inflation is high, choosing not to invest means that any savings you have will be losing its purchasing power over time.
Mr Timothy Ho, co-founder and managing editor of investing website Dollars and Sense

Mr Timothy Ho, co-founder and managing editor of investing website Dollars and Sense, said: “If inflation is high, choosing not to invest means that any savings you have will be losing its purchasing power over time.

“As a young person, our biggest advantage is age. We can easily invest today in good companies and hold for 20 or even 30 years, without worrying about having to sell them as long as we have our emergency savings and manage our finances well."

Far from looking for the shiny new toy, Mr Ho stressed that "investing should be dull, not exciting". 

"Any investments you make today ought to be investments you are willing to hold on to even if the prices decline in the short to midterm," he said.

Mr Ho suggested that young working adults should set aside between six to nine months of their monthly average expenses before they invest, so that they have funds for rainy days. 

For youths looking to make short-term investments, some less risky assets include the Singapore Savings Bonds, Money Market Funds and short-term endowment plans, he said.

He added that youths who are just starting to invest should treat it like "learning any other life skills... start out slow and build confidence over time". 

CIMB Private Banking economist Song Seng Wun said that youths should avoid biting off more than they can chew.

He added: “There’s no such thing as a free lunch, the larger the investment risk, the larger the payout or loss. One big lesson is the spectacular rise and fall of the crypto space, which we are still seeing its consequences unfold.”

“While it is not wrong to take risks, it should be a calculated risk rather taking it on blindly because of the promise of returns," he said. 

Long-term investment plans may seem boring, but “boring returns compounded can make a difference years down the road”, he reiterated. 

Related topics

inflation Youth the big read household economy

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