Fresh Graduate 101: How Much Should I Save? And Should I Invest?


Coming into your first job, you are finally making some money; there are so many things you could do with it, so many things to buy. However, in your past 4 years in university, it is very likely that nobody has taught you how you should use money.

Indeed, why would they? Money brings you financial freedom. The ability to do whatever you want (within legal means of course). The lack of money or even worse debt restricts your freedom, it keeps you subservient and you have to “do what you are told”. After all, you can’t just quit right?

What this article will give you is a framework on how to think about money. You will understand why it is important to save, why is it important to invest and also when you should NOT be investing.


The Broad Framework of Money

Money in its most basic form is a “store of value” or to be more exact (with monetary “quantitative easing”) it is a “promise of value”. The easiest way to get money is to generate value and to demand payment for the value that you have generated.

That is in essence what a job entails. You come into work, generate value for corporations and they pay you for it. Of course, they will always pay you less than the value you generated for them. i.e If you helped them to make 200k this year, they might pay you 100k or if you have no idea just 50k.

With the money that you are paid, you have 4 main choices.

CONSUME; basically spend this sum of money to derive utility/” happiness” from it. (This is the best case scenario, sometimes we spend money and we feel bad from it)

SAVE; Saving is what your parents always exhorted for you to do. “Ah boy ah, go put that ang pao into the piggy bank” – Sounds familiar?  Savings basically provide the function of a rainy day slush fund for you. However, be mindful that it earns no returns and in today’s monetary madness of QE, suffers from an erosion in value from inflation.

INVEST; one of the more hyped up and most commonly misunderstood uses of money. When you invest, you basically hope for your money to grow. There is much money to be made in misguiding investors, especially in such an opaque field where information is plentiful but often misleading and downright wrong. I’m going to go out on a limb and say this but most investment products in Singapore charge you excessive fees and have been consistently underperforming. What does this mean?  It means you lose money.

PAY OFF DEBT; Like what it means, paying off debt reduces your interest expense and is one of the best ways to use your money, especially when starting out initially as a fresh graduate with student debt. Avoiding interest payments of 6% p.a is like getting returns of 6% p.a (Good luck trying to find such returns in “safe instruments”)


Your Current Position in Life

After graduating from University, most of you will be looking at student loans of about roughly 30k, on a plan that demands about 5% interest rates (assuming you took student loan packages from the local banks which will charge you interest at the prime rate).

You will probably have a job that pays you about 3.5k and after deducting for CPF and taxes, you will have about 2.8k left.


The Guide to Winning

It is not hard to retire comfortably and early if you follow every single step here. It is a mathematical certainty.

When you still have student loans (Lvl 0)…….
1) Pay off all your student loans as fast as possible.

If you have parents who are financially able, do ask them if it is possible for them to pay off your student loans and then you pay them back. This way, they earn interest instead of the bank. (By the way, really please do pay your parents back since it is only filial to do so)

If not, try and pay it off in 2 years. You are looking at monthly payments of 1.3k. The amount of total interest you pay if you do so is about 1.5k, if you take 5 years to do it, you will end up paying the bank 3.9k in total interest. By doing this, you save yourself 2.4k that you can use to take a trip to Japan (yolo).

2) Cut expenses

Honestly, if you only earn about 2.8k in take home pay, you have no business drinking Starbucks or eating at cafes. The truth of the matter is (and research also shows), we treasure experiences way more than buying things. All those daily Starbucks and weekly café trips add up, does it really make you feel that much better?

By cutting out a daily Starbucks and a weekly café treat, you save about $230 a month, which works out to about roughly about 1.4k (half of a month of take home pay).

After paying off student loans (Lvl 1)…….

Congratulations, you have cleared the first obstacle in your student life!

You should currently be in the second year of your career and have had a pay raise. The game of life is very different for you now; You will have savings (because you no longer have to pay interest!)

What do you do with these savings?

3) You invest them in a passive, low cost ETF like SPY or some MSCI World Equity ETF.

I will explain why, how and the mechanics in another post, but honestly if you are not an investment professional, you have no business trading your own money (It is very very hard) and like what I said before, most active managers do not outperform the market so no point trying to pick funds as well.

In short, out of your 2.8k take home salary, this is what you will be spending them on.

  • 500 dollars to your parents
  • 500 dollars for expenses (Spending 10 dollars on a weekday, 20 on a weekend with an extra 100 for whichever social event)
  • 100 dollars for bills
  • The rest (1.7k) towards paying off your student loans


In conclusion, it is possible to thrive financially even if you have an average salary. Being in Singapore, we are lucky to be in one of the countries with the greatest amounts of opportunity (No other country offers so much support to start your own company, more on entrepreneurship and why you should do it in another post)

TLDR: Repay all your student loans, replace Starbucks with kopi kosong to save your wallet and waistline, replace cafes with hawker centres so that you can be the de facto expert on cheap and good eats, read the next article when you have repaid all your student loans to find out how you should invest.

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