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


Generation Z adults today have the unfortunate distinction of entering the workforce in an uncertain economy.

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

In pursuit of the FIRE (Financial Independence, Retire Early) lifestyle, many Gen Z (broadly defined as those aged 24 and under) and Millennial (age 25-40) adults have decided to be frugal in order to reach early retirement.

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

The question is: if someone is limiting their spending, where should their money go?

A survey conducted by Franklin Templeton last year showed that while 83% of Gen Z and Millennial adults save money, 50% view investments as an expense.

Just over half said it was important to start investing young, which means 49% did not. Their data also showed that 20% of early or pre-employees will not consider investing.

The sentiment is likely more pronounced today, given that many young people had considered investing in tools such as cryptocurrency (35%) and stocks (46%), according to the same survey.

Given the poor performance of both markets in 2022, and also the anecdotal stories young people have read about people losing their money, such as a story posted by TODAY Online about a 27-year-old who lost his savings and those from his mother into crypto investments, leaving the money in his savings accounts suddenly doesn’t seem so bad.

But is it so? Singapore’s main measure of core inflation hit its highest level in nearly 14 years in July, and prices for key Gen Z expenses like petrol, rent, food and expenses are rising particularly quickly.

Savings accounts might start offering much better interest rates, but they’re unlikely to match the rate of inflation.

So what can a Gen Z do?


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

Inflation also has a clear impact on the real returns of our investments, and at present investors are watching closely how policymakers are handling the steep rise in costs.

Simply put, an investment that returns two percent before inflation in a three percent inflation environment would have generated a negative return after adjusting for inflation.

Assuming an estimated annual inflation rate of 2.5%, deposits saved over 20 years would lag inflation by approximately 35%.

This means that 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 inflation rate of 2.5%.

In our 20s and early 30s, most of us don’t have a lot of financial capital, given that we’ve only just started earning a salary from work. However, now is the perfect time to think about long-term investments.

You have a very long time horizon before you need to start withdrawing money for your retirement. It also means you can better harness the power of compound interest at this point in your life.

Additionally, you are able to tolerate riskier investments which, over long periods of time, are most likely to yield higher returns after weathering the ups and downs of the market.


Young Singaporeans said a limited budget is the biggest challenge they face when considering 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 start investing effectively.

A good place to start for budding investors with limited capital would probably be index funds. Although these funds may not seem exciting at first glance, 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 creation.

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

If you’re aiming to put down a down payment on your first home in the near future, this portfolio should have a higher weighting in safer assets such as bonds and money market funds.

For long-term goals like retirement, the portfolio could have a 70-90% equity allocation, depending on your risk tolerance.

Index funds are particularly attractive if you don’t have large sums of money, as they provide an inexpensive route to diversification.

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

By choosing funds that largely track the market passively, you are choosing funds that don’t have fund managers who actively pick stocks and time the market.

This usually results in lower fees and expense ratios, which means higher returns for you.

With the responsibility of keeping track of your investments and keeping up to date with dynamic financial markets, you can devote more time to equipping yourself with investment knowledge.


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

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

So how much of your savings should you really invest?

The precise answer to this question depends on many factors: your income level, the amount you currently have in savings, and whether you have an emergency fund. Experts generally recommend investing around 10-20% of your earnings.

As a Gen Z, this percentage may not apply if you haven’t entered the workforce. If so, remember this: investments should only begin after you have built up an emergency fund.

Having a pool of savings — usually equal to around three to six months of your expenses — serves as a safety net to fall back on in the event of job loss, financial hardship, or unexpected expenses.

Building a secure foundation with your emergency fund is therefore the top priority. Only then can you consider investing the remaining cash flow.

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

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

If in doubt, take the first step by calling in the 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 finances, don’t be indifferent to the need to improve your own financial literacy. Gen Z adults have time on your side – don’t doze on it.


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


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