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Commentary: Be Gen Z, not Gen Zzzzzz, when it comes to investing

Gen Z adults today have the unfortunate distinction of entering the job market in an uncertain economy.

The author believes that even with a modest amount of money in your pocket, there are ways to begin investing effectively.
The author believes that even with a modest amount of money in your pocket, there are ways to begin investing effectively.
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Gen Z adults today have the unfortunate distinction of entering the job market in an uncertain economy.

The cost of living is going up, but good-paying jobs are harder to come by as companies tighten their belts in fear of a recession.

In pursuit of the Fire (financial independence, retire early) lifestyle, many Gen Z adults (loosely defined as those aged 24 years old and below), and millennials (between 25 and 40 years old) have taken to being frugal in order to achieve early retirement.

While it’s not a bad thing to do in the current macroeconomic situation of high inflation and subdued growth, it could impact economic recovery if taken to the extremes.

The question is: If one is curbing spending, where should their money go?

A survey by Franklin Templeton last year showed that while 83 per cent of Gen Z adults and millennials were saving money, 50 per cent considered investments as an expenditure.

Slightly more than half said it’s important to start investing young, which means 49 per cent didn’t. Their data also showed that 20 per cent of first jobbers or pre-jobbers will not consider investing.

The sentiment is probably more pronounced today, given that many youth had considered investing into tools such as cryptocurrency (35 per cent) and equity (46 per cent), according to the same survey.

Given how both markets have performed poorly in 2022, and also anecdotal tales the youth read about people losing their money such as this TODAY report about a 27-year-old who lost both his and his mother's savings in crypto investments, leaving money in one’s savings accounts suddenly doesn’t seem so bad.

But is it, though? Singapore’s key core inflation measure climbed to the highest level in almost 14 years in July, and the prices of major Gen Z expenses such as petrol, rent and food are rising especially quickly.

Savings accounts might start offering much better interest rates, but it is unlikely to ever match the inflation rate.

So what can a Gen Z do?


While inflation hurts our pockets, that’s not the only impact to our finances that we should consider.

Inflation has a clear impact on our real investment returns too, and in this time, investors are watching with care to see how policymakers manage sharply rising costs.

In simple terms, an investment that returns two per cent before inflation in an environment of three per cent inflation would have generated a negative return when adjusted for inflation.

Assuming an estimated annual inflation rate of 2.5 per cent deposits saved across 20 years on average deposit rates would lag inflation by about 35 per cent.

That means a customer with S$50,000 saved in cash would have saved S$53,406 after 20 years, which is less than the S$81,930 needed to beat the assumed 2.5 per cent inflation rate.

In our 20s and early 30s, most of us do not have much financial capital, given that we have only just started drawing a salary from work. However, this is the perfect time to think about long-term investments.

You have a very long time horizon before you will need to begin withdrawing money for retirement. That also means you can better harness the power of compound interest at this stage of your life.

In addition, you are able to tolerate riskier investments that, over long periods of time, are most likely to generate higher returns after riding through the ups and downs of the market.


Singaporean youth have said that a limited budget is the biggest challenge they face when thinking about investments.

However, this idea that you have to be rich to start investing couldn't be further from the truth. Even with a modest amount of money in your pocket, there are ways to begin investing effectively.

A good starting point for budding investors with limited capital would likely be index funds. While such funds may not sound exciting at first mention, historical data has shown that buying such funds is actually one of the most successful investment approaches.

The father of passive investing, Jack Bogle, would agree. Even investment titan Warren Buffett has personally endorsed index funds for wealth building.

You can have separate investment portfolios for your short-term and long-term goals. The difference will lie in the risk profile, as determined by the asset allocation.

If you are aiming to make a downpayment for your first home in the near future, that portfolio should have a higher weighting in safer assets such as bonds and money market funds.

For longer-term goals like retirement, the portfolio could have a 70-90 per cent allocation in equities, depending on your risk tolerance.

Index funds are particularly attractive if you do not have large amounts of money as they are a low-cost route to diversification.

Look for index funds that consist of a wide range of securities, so that your overall risk is automatically lowered through broad diversification.

By picking funds that broadly track the market in a passive way, you are picking funds that do not have fund managers actively stock picking and timing the market.

This in turn generally translates to lower fees and lower expense ratios, which means higher returns for you.

With the responsibility of tracking your investments and keeping up with the dynamic financial markets lifted off your shoulders, more time can be spent on equipping yourself with investment knowledge.


Here’s a reality check: All investments carry risk.

While it may be tempting to pour all your savings into the financial markets to accelerate the process of wealth building, there is the inherent risk of losing everything.

So then how much of your savings should you really invest?

The specific answer to this question depends on many factors: Your income level, the current amount of savings, and whether you have built an emergency fund. Experts generally recommend investing about 10-20 per cent of your income.

As a Gen Z, this percentage might not be applicable if you have not entered the workforce. If that's the case, remember this: Investments should only start after you have set up an emergency fund.

Having a reservoir of savings — generally equal to about three to six months of your expenses — serves as a safety net to fall back on in the event of job loss, financial distress, or any unforeseen expenses.

Building a secure foundation with your emergency fund is thus the top priority. Only then can you consider investing the remaining monetary inflows.

This can be in the form of your monthly pay from internships and part-time jobs, or even a fraction of your pocket money.

To improve your financial knowledge, education is essential — as is avoiding investments that you don’t fully understand.

If in doubt, take the first step by engaging the help of professionals, after which you can gradually learn along the way.

Ultimately, remember that personal finance is, in essence, personal. Don’t let other people’s stories of their investment conquests easily influence what you choose to do. Because for every success story, there are many tragic ones.

So when it comes to your personal finance, don’t be apathetic about needing to improve your own financial literacy. Gen Z adults have time on your side — don’t snooze on it.



Gregory Van is CEO of Endowus, a digital wealth advisory platform in Singapore.

Related topics

Gen Z investing finance retirement

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