How Age Changes the Way You Think About Money

Your perception and use of money will change with age. Here's what you can expect as you enter your 20s, 30s, 40s and beyond.

Why do many Singaporeans regret not saving money after a certain age? Why does budgeting become harder as you get older?

One of the strange facts about money is that your perception of it changes with age.  In many cases, we would benefit from some foresight. The following will prepare you for common shifts in mentalities throughout your life:

Money in Your Late Teens (17 to 19)

At this age, money often used to socialise. It is not so much about getting clothes, bags, or gadgets (although that may be the case with some); it is more about being able to hang out with friends.

Being able to eat out with friends or go on a long weekend trip to Malaysia with them consumes most of the limited allowance we have. The most money guzzling activity is often clubbing.

When it comes to issues like saving or buying insurance, this is often still relegated to our parents.

The Major Hazard:

At this early stage, we often don’t want to think of issues like buying a house or retiring. “I’m a teenager, I shouldn’t be thinking about it,” is a common, stressed outcry of protest.

And unless you’re very mature, that’s often true. It’s a stretch to look that far ahead.

But what can be useful at this stage is to start using credit in small, manageable amounts to learn responsibility. A S$500-limit student credit card, for example, can be used to build up a credit score, while at the same time being a learning tool (e.g. learning how quickly we really spend money).

Those undergoing National Service, if they have a great degree of discipline and maturity, should also consider saving up 80% of their NS allowance. Over two years, this will help offset your university costs.

Money in Your Early 20s (20 to 24)

Money at this point is not just about having a good time. Money becomes conflated with social standing.

When we are younger, we tend to be more open about not having enough money (e.g. I can’t hang out with you this week, I am broke). In our early 20s however, many of start to find this embarrassing.

The Major Hazard:

Many purchases made are often done so to fit in with peers. This can cause some of us to overextend ourselves by eating in places we can’t afford, or buying shoes that max out a credit card.

Social anxiety compounds financial difficulty. Sometimes we can’t afford to keep up with our peers, but we don’t want to show it either. This is especially lethal because our early 20s is when some of us first qualify for credit cards in Singapore.

So while many consider the 30s to be a critical age, we actually feel this is the most perilous time. It is possible to inflict financial damage that can last a decade, due to the combination of (1) having credit, (2) getting the first serious paycheques, and (3) feeling significant pressure to spend.

It is important, in your early 20s, to develop a thick skin. The more comfortable you get with saying “Sorry I can’t afford that”, the sooner you will feel relief from all the pressure.

And when you do spend, make sure you're getting the best value by making the most of your credit card offers.

Money in Your Late Twenties and Early Thirties (25 to 32)

This is when most people get serious about money. They are forced to by changing circumstances. Often, they are facing marriage, a first child, or having to buy their first house. The mid- to late-twenties is also prime time to start planning for retirement (yes, you'll look back when you're 65 and think, "How did those 40 years fly by so fast?").

Suddenly, the details of index funds and variable rate property loans become interesting. As do products like endowment insurance plans or balance transfers. This is the age of worry and panic – at this point, financial considerations often eclipse worries about what our friends are buying.

This is also the age at which we start to earn more, but it’s also the age where serious debts appear.

The Major Hazard:

Panic sets in, causing us to go along with the first strong voice we hear. At this age, we are dealing with debts that we never imagined possible before. Numbers like S$20,000 (wedding), or S$400,000 (home loan) seem downright surreal.

How could we ever pay that?

This is why many “scaminars” – seminars that sell you trading courses, gold buyback schemes, or multi-level marketing gibberish – target this group. They know people at this age range are facing critical money decisions, and most have had little preparation.

At the same time, those at this age often earn significantly more than young students or entry-level workers. They’re a goldmine waiting to be ripped off.

Get rich quick schemes, along with false financial gurus, will clamour for your attention at this age. The key is to take a deep breath and stop chasing a quick buck. Calm yourself by realising that millions of people have paid for their homes or sent their children through university. There is no reason you won’t be able to do so as well.

Next, remember that money is very simple. It is about spending less than you earn, and saving at least 20% of your income (until you have six months of your income). And when it comes to paying off debt, look at flexible ways to borrow a little to save a lot.

Money at the Peak of Your Career (33 to 45)

This is the age at which many of us hit our peak earning capacity (note: many, not all). At this point many of us are calmer about dealing with big numbers, and even the concept of a S$1.5 million condo may not phase us.

This is the age at which many start to worry about their health and their outstanding debts. Many also start to worry about retirement at this point – which is unfortunate, since it’s best to start thinking about it in your mid-twenties.

Many of us start to support our parents financially, or have raised children into their teens. As such, we may actually have less disposable income despite earning much more, and the savings we have by the time we are 35 are often less than "ideal" amounts.

Certain financial realities, such as the rate of inflation or the cost of healthcare for ageing parents, will now factor into a more mature approach.

The Major Hazard:

Complacency is the major hazard here. Most of us will be at the peak of our careers, and too busy to even contemplate skills upgrading courses or running a side-business.

At this point, you are often managing departments or major projects; everyone and everything demands your time. The thought of doing a second degree, or running a company on the side, can be almost laughable.

It shouldn’t be. One of the worst things that can happen is to be retrenched in your 40s, a fate that faced many of our PMETs in 2015 (15,000 layoffs took place). Do not allow complacency to get in the way of skills upgrading.

In fact, you should be even more aggressive in seeking new income sources. Remember that your salary may only decline past this point, and this phase of life will not go on forever.

Make the time to upgrade, and find alternative income streams.

Money in Your Mid-40s to 50s (46 to 55)

By this point, worries about outstanding debts (if any) are actually lessened. Most have children who can earn their own money, or who have already gone through school. Long term plans, such as endowment plans or investment products purchased in our 30s, would have come to fruition.

Work-wise, income may remain unchanged. But some of us, such as those in senior management or running successful businesses, may reach the category of high net worth individuals (e.g. $5 million or more in net worth). This will require a different level of wealth management.

Many people start to think about their legacy, such as their will, at this point.

The Major Hazard:

Those who have not planned for retirement are, by now, counting on their house as a retirement fund. Or else they have decided not to even think about it, because it’s “too late” and they’ll surrender to fate.

Neither are good options. Regardless of whether you should have started earlier, it’s not too late to take drastic measures. You should still talk to a financial advisor – you will have a degree of maturity you did not have earlier, and may have an income that is much higher. Something can still be done.

If you have planned for retirement, it is important to rethink your portfolio. Be less aggressive, and allocate more toward protecting your wealth than growing it. You should be hesitant to take big risks at this point.

Money Towards Retirement and Beyond (55 to 65 and Beyond)

At this point, your concern is often either toward children and grandchildren, or toward enjoying the last of your twilight years. Healthcare costs will be at the forefront of your mind, as is your legacy.

The Major Hazard:

Stop worrying so much about your children and grandchildren. Do not sell your flat and move in with them, in order to give them money. Come to terms with the fact that you’ve done all you can, and it is now their turn to look after themselves (and you).

For the sake of personal comfort, have your will formalised. And go ahead and do all the things that you wanted to do, while you’re still able.

Bottom line

While it's good to be aware of how your financial priorities may change through different life stages, it's also important to remember that every individual's journey is unique. Don’t panic over how much you have or haven't down right now, and whether that’s “right” for your age. It’s too late to start making sound financial choices.

Read these next:

Pros and Cons of Keeping Your Savings in Your CPF Special Account

3 Myths About Retirement Planning in Singapore (And Why They’re Wrong)

How to Save Money For a Flat Before Your 35th Birthday

4 Best Places to Keep Your Retirement Savings in Singapore

Why Financial Advice for Rich Singaporeans Won't Work For You