Savings Goals

Here are some key savings tips for you:

1. Four basic things to save for:

• emergencies
• retirement
• education
• housing

2. The sooner you start saving, the better off you’ll be!

   
   

   Use our savings calculator to find out how much you’ll gain by saving for an additional 10 years

3. Aim to have at least 6 months of your salary in emergency savings

   
   

   This allows you or your family to have some funds in case you lose your job, fall ill or need to pay for repairs to your home.

4. Look after yourself first!

   
   

   Arrange with your bank to automatically transfer a portion of your salary into a separate savings account for your savings, before you use the money for your monthly expenses (except debt repayments, which you should pay off first). 

5. Keep separate accounts

   
   

   Separate your accounts for your monthly expenses, emergency savings and long-term savings

6. Make additional contributions to EPF for your retirement

   
   

   Invest in EPF or alternatively invest a fixed sum each month in less risky investment products (find out more here)

7. However low your income, you can always find opportunities to save.

   
   

   Check out some tips on how to plan your budget to maximise your savings here.

When should I start saving?

You should start saving as soon as possible, because this will allow you to save more by the time you need the money. On top of that, if you’re putting your money into a fixed deposit account, EPF or Amanah Saham Nasional, starting earlier would mean you earn more money in interest payments as well!

Want to know how this works? Read more here.

How do I start saving?

Step 1 – Set some basic savings goals

Prioritise saving for big life events first such as retirement, education, housing and also emergencies. After this you may set savings goals for other things like vacations, new gadgets, etc.

But remember, it’s important to save up for the big life events first, because not planning in advance for these could leave you in a lot of debt and stress in the future.

Step 2 – Figure out how much you can save each month

Compare your monthly income and expenses. Look at what you can reduce or cut out from your expenses to increase your savings per month. Check out our article on planning a budget to help you figure this out. 

Step 3 – Set aside money for your savings

Now that you know how much you can save each month, create a new bank account for your savings and arrange to automatically transfer this amount to your special savings account each month.

For short term or emergency savings, you probably only need a regular savings account. For longer term savings, consider putting your money in a fixed deposit account, EPF or Amanah Saham Nasional to earn a higher interest which will grow your savings more. You could also consider other investment options like Exchange Traded Funds.

For more tips on where to put your savings, click here.

Step 4 – Monitor your savings and watch as you get closer to your savings goals!

Once you’ve set your savings goals and are regularly setting aside money to work towards these goals, don’t forget to review your goals every 6 to 12 months in case  you need to make small changes from time to time as your situation changes.

For example, if you’re planning to get married, you may need to include a savings goal for wedding expenses. Or if you’re planning to have children, you might want to start saving for your child’s education.

Emergency Funds: As you may need these funds on short notice, you should place them in an account where you can quickly withdraw the money like short-term fixed deposits. You can have a variety of fixed deposits with different tenures, so that if you only need a portion of the money, you can uplift some of the accounts without giving up interest on the rest. 

Be careful: Placing your emergency funds in stocks or unit trusts carries big risks. If you’re forced to sell your shares at a particular time when the market is down, you could end up losing a lot of money!

If you are thinking of placing the money in EPF, be sure to read up on when and how much you’re allowed to withdraw from your EPF account.

You should have a minimum of 6 months’ salary in your emergency funds, but you can always choose to save more and increase your financial stability.

Retirement Funds: Here, you might want to consider doing the opposite to the above. These are funds that you’ll only be needing in 20 to 40 years’ time, so it’s very important that you use that time to grow this pool of money. 

The most important rule here is to make sure the value of your retirement funds do not get eaten away by inflation. Have you ever heard your parents talk about the days when they could purchase a mi goreng for 20 sen? And how now that same plate would cost you RM7? That’s inflation!

People feel safe holding cash, but increasing prices mean that your cash is able to buy less and less over time. Savings accounts, for example, are NOT inflation proof. 

A good place to invest your retirement savings is in EPF, which guarantees a minimum return (before inflation) of 2.5%, is well diversified and lower risk than other investment products on the market.

Alternatively, you could invest in less risky investment products such as Amanah Saham Nasional. 

Want to learn more about investing for your retirement? Check out Investing 101  and planning for your retirement. 

There are generally three main reasons why you should have emergency savings:

i) Illnesses – Life can always take an unexpected turn, and you may be surprised that you need more than you imagined in times of crisis. According to the ASEAN Costs in Oncology (ACTION) study by the George Institute for Global Health, 46% of cancer patients have used up their personal savings one year after diagnosis. Every year, there are more than 30,000 new cases of cancer, let alone other diseases . [Source: Malaysiakini, 6th November, 2015, (https://www.malaysiakini.com/advertorial/318645)]

ii) Job losses – Jobs may not be as secure as we imagine. In 2015, as global oil prices fell, Petronas and other oil and gas firms had to lay off many employees in order to cut down costs. Some firms went bankrupt altogether.

iii) Repairs – If you own a house or car, there may come a point where you may be hit with a significant repair bill. You want to be sure that you have enough emergency savings to cover these expenses.

On top of having an emergency fund, don’t forget to find a suitable life and medical insurance policy to suit your current situation and needs. This way, your emergency savings won’t need to cover all your expenses if something unexpected happens, the insurance will also provide you with financial protection.

Feeling Brainy?

Why should you start saving as early as you can? The chart below will show you the difference between starting to save at age 25 versus only starting at age 35. At a 3% per annum interest rate, delaying for 10 years would cost you RM65,000 at retirement!

*Assumes a 3% interest rate per annum, with interest paid annually, and retirement at age 65