Not sure how much to save, insure or invest? These rules of thumb can help you plan your finances
Making money is one thing, but figuring out what to do with it is another story altogether. Between everyday expenses, saving for a BTO, and potentially supporting ageing parents or raising a family, it’s easy to wonder if you’re putting enough aside for the future.
How much should you have saved for emergencies? How much insurance coverage is enough? And how much of your income should you actually be investing?
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To help you answer these questions and more, MoneySense, Singapore’s national financial education programme, has put together Your Financial Basics, a guide that breaks down financial planning into simple rules of thumb.
With guidance tailored to different life stages, from students and fresh graduates to parents and retirees, the resource offers practical rules of thumb to help Singaporeans make more informed financial decisions.
Here are some key numbers worth knowing.
Have enough emergency funds to cover at least three to six months of expenses
An emergency fund is money reserved for unexpected expenses, whether it’s an urgent home repair, a medical bill, or keeping yourself afloat between jobs.
MoneySense‘s Your Financial Basics guide recommends setting aside at least three to six months’ worth of expenses, which should provide a sufficient buffer for most people. However, those with irregular income, such as freelancers, may want to aim for 12 months’ worth to tide them over periods with less work.
That doesn’t mean multiplying your monthly salary by six. Instead, work out how much you typically spend each month, including household expenses, loan repayments, insurance premiums, and other essentials.
For example, if your monthly expenses come to S$2,500, a three- to six-month emergency fund would amount to roughly S$7,500 to S$15,000. You may need a larger buffer depending on your circumstances.
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To build that buffer, it helps to distinguish between needs and wants, so you can identify where to cut back on spending. Your mortgage payment is non-negotiable, but squeezing in a third holiday to Japan this year? Perhaps not so much.
This makes it easier to adopt MoneySense’s recommended “save first, spend later” approach, where you set aside savings whenever your salary comes in, rather than saving whatever is left at the end of the month.
Check whether your insurance is actually covering enough
Insurance can be one of those things people buy, file away somewhere, and assume is settled. But having some insurance isn’t quite the same as having sufficient protection.
According to Your Financial Basics, you should aim for coverage equivalent to nine times your annual income for Death and Total Permanent Disability, and four times your annual income for Critical Illness.
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These benchmarks are based on the Life Insurance Association’s Protection Gap Study. The 9x figure estimates how much financial support dependants may need to cover expenses, pay off debts, and maintain their lifestyle following a death or permanent disability.
Meanwhile, the 4x figure accounts for an assumed five-year recovery period from a major illness, during which someone may be unable to work or earn as much.
Critical illness coverage is especially important, yet many people may not have enough of it. After all, falling seriously ill doesn’t mean your bills stop coming, and insufficient coverage could leave both you and your family struggling financially while you focus on recovery.
For someone earning S$60,000 a year, the recommended coverage works out to S$540,000 for Death and Total Permanent Disability, and S$240,000 for Critical Illness. Of course, your actual needs may differ depending on your lifestyle, financial commitments, and the number of people depending on your income.
Sufficient protection shouldn’t come at the expense of your everyday finances either. MoneySense’s Your Financial Basics recommends spending no more than 15% of your take-home pay on insurance, and term life plans are a cost-effective way to ensure sufficient protection.
It’s also worth checking what you’re already covered for, including national schemes such as MediShield Life and CareShield Life. Review your insurance coverage every two years or after major life changes, such as getting married or having children, to ensure it still meets your needs.
Aim to invest at least 10% of income for future goals
With your emergency savings and basic protection in place, you can start taking the next step towards growing your money: investing.
Under Your Financial Basics, the suggested benchmark is to invest at least 10% of your take-home pay towards both short- and long-term financial goals, whether that’s saving for a home, funding your child’s education, or building a nest egg for retirement.
The idea is to start early and benefit from compounding returns, where your investment returns are reinvested to potentially generate further returns over time.
Of course, between everyday expenses, maintaining your lifestyle, and paying for insurance, there are plenty of competing priorities for your money. That’s why the guide suggests 10% as a starting point, while encouraging those who can afford to invest more to do so.
The guide lists options such as Singapore Savings Bonds (SSBs), T-bills, and fixed deposits for shorter-term goals, and CPF top-ups, diversified exchange traded funds (ETFs), and unit trusts for longer-term ones.
As investing involves risks, it’s important to consider your financial goals, how much risk you’re comfortable taking, and how soon you’ll need the money.
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As a simple benchmark, someone taking home S$4,000 a month after CPF contributions could aim to invest around S$400 monthly. Starting small and investing consistently can build your investments over time.
Retirement planning starts well before retirement
Retirement can feel very distant when the immediate priority is clearing next month’s credit card bill or keeping up with other pressing financial commitments.
But starting your retirement planning early can make it easier to build up the savings you’ll need, as your money has more time to grow through compounding returns.
Besides the CPF contributions made throughout your working years, regular cash top-ups or CPF transfers to your Special/Retirement Account can help grow your retirement savings and potentially boost future payouts.
A practical first step is to work out how much money you’ll need monthly for your desired retirement lifestyle, preferably well before retirement approaches. After all, a retirement spent travelling regularly will probably require a different budget from one spent enjoying slower days at home.
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The Retirement Payout Planner can help estimate potential monthly payouts, which can then be compared against expected expenses and identify any gaps early enough to plan for them.
For those already retired, MoneySense highlights ways to supplement retirement income through housing monetisation options, including renting out spare rooms, downsizing, or exploring schemes such as the Silver Housing Bonus and Lease Buyback Scheme.
For a more interactive way to explore your financial future, check out the Ready for Life Festival 2026 roadshow at Northpoint City from 20 to 22 Nov, which will feature interactive activities, practical financial planning tips, and CPF tools to help you prepare for the future.
Financial planning isn’t only about growing your money
Saving, insurance, and investing tend to get most of the attention, but Your Financial Basics also covers something equally important, if a little more uncomfortable to think about: legacy planning.
This includes making a will to determine how your assets should be distributed after your death, as well as a separate CPF nomination to decide who receives your CPF savings, since these aren’t covered by a will.
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There’s also the Lasting Power of Attorney (LPA), which lets someone you trust make decisions on your behalf if you lose mental capacity, and Advance Care Planning (ACP) to record your preferences for future healthcare.
For those supporting ageing parents, the guide also covers CPF top-ups and transfers to help boost their parents’ retirement payouts, as well as using MediSave to pay their parents’ MediShield Life and CareShield Life premiums.
These arrangements may not feel as exciting as watching an investment portfolio grow, but sorting them out early can spare loved ones plenty of confusion and stress down the road.
Use MoneySense’s Your Financial Basics guide as a starting point
Of course, personal finance is called personal for a reason. Someone raising young children and supporting ageing parents will probably have very different priorities from a fresh graduate still living with family.
That’s why the figures above are best treated as rules of thumb rather than one-size-fits-all prescriptions.
To help Singaporeans navigate their different financial needs, MoneySense’s Your Financial Basics resource also offers guides tailored to different life stages, whether you’re still studying, just starting your career, juggling family commitments, or preparing for retirement.
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You can also explore the full Your Financial Basics guide for a more detailed breakdown of the financial planning rules of thumb covered above.
And if you’d prefer your financial lessons with a little more entertainment, MoneySense has a 10-episode microdrama series that brings several key financial rules of thumb for emergency funds, insurance, and investment to life through humorous, everyday scenarios.
Catch the series on TheSmartLocal’s Instagram, TikTok, and YouTube, as well as on MoneySense’s Facebook and Instagram.
For more practical tips on managing your money and planning for the future, follow MoneySense on Facebook and Instagram.
This article was brought to you in collaboration with MoneySense.
Featured image adapted from Pranithan Chorruangsak’s Images on Canva, Winnie Bruce from Studio South Korea on Canva, and Satjawat Boontanataweepol’s Images on Canva, for illustration purposes only.
