My thoughts on the risk of blind saving and over saving

As Singaporeans, we are all too familiar with the concept and importance of savings. However, not a lot of us are familiar with the risks of blind savings and over saving, which is what I would like to talk about in this article.

Do not get me wrong, saving is important, even animals do it. Just as a squirrel that hoard or stockpile food in preparation for winter, we humans also need to stockpile our resources (money) in anticipation of retirement or big-ticket items (i.e., property/children’s education).

What I am not for, is the act of blind savings and excessive saving to a point where it ends up causing more harm than good.

Let us define blind saving and over saving.

Before we continue, let us define what I mean when I speak of blind saving and over saving.

Blind Saving is the act of saving for the sake of saving. You are saving without having a clear intention or motivation behind what you will be using the funds for.

Over Saving is an extreme version of blind saving where you are saving too much to a point whereby you are sacrificing your present quality of life.

So…what is the problem?

The problem I have with blind saving and over saving is that it demonstrates a lack of understanding of the role of money as well as the purpose of saving.

Like it or not, money is an enabler. Having money enables us to do or get the things we want – in other words, it grants us options. The whole point of having money is to have the option to live the type of life that you want.

Savings, on the other hand, is a form of delayed gratification. Most of us think that we are saving for more money but that is not the case. You are saving today because you want to have the options that money can buy for you in the future. As such, you are willing to sacrifice the options you have today in hopes of a better future.

That being said, the problem of blind savings is that you are just saving for the sake of saving, and as a result, you could be saving or investing in instruments that may not be suitable for what you need in the future. Imagine sacrificing what you could have enjoyed today AND not getting the results that you need for a better future. That is a double whammy that nobody would like to experience.

With regards to over saving, the issue I have with this is the assumption of living a healthy and long life. As we all know, life ain't all sunshine and rainbows. Imagine sacrificing too much of what you could have enjoyed today only to find out that you will not be able to enjoy your savings later due to poor health or an accident. Once again, that is a double whammy that nobody would like to experience.

The key is to strike a balance.

Saving for the future is important but having a proper quality of life today is equally as important as well.

Do not just save for the sake of saving or save for an undefined goal. Instead, learn to define and quantify the things that you should be saving for and strike a balance between the present and the future.

To truly achieve a balance, you must plan your finances and “stress test” your plan under different scenarios to have a better understanding of the degree to which you are willing to sacrifice today for the future you.

Doing so will help you align your expectations and understand the plausible outcome of your actions which will provide you with a clear understanding of:

1. What you are saving for

2. How long do you have to save?

3. How much should you set aside to save

4. What instrument should you consider to “park” your savings

So yeah, that’s just some of my 2-cents when it comes to saving.

While we’re on the topic of savings, you can check out my other articles regarding the same topic here:

• The Ultimate Guide On Short-Term Savings In Singapore

• Things you must know before you purchase any savings plan

Self-Plug (A man’s got to eat)

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Daniel is a Licensed Independent Financial Consultant with MAS and a certified Associate Wealth Planner that provides advice in the following areas:

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• for retirement planning advice– find out more here

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Disclaimer:

This article is meant to be the opinion of the author and is for information purposes only.

This article should not be seen as financial advice

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