So, apparently Singaporeans are some of the world's wealthiest people. If this recent report is to be believed, the average household wealth in Singapore is US$277,000 (S$394,000).
Now, you might be fretting over how you're the only one struggling in a country of supposed rich folk. There there, dry your eyes-you're not alone. In fact, there's a whole bunch of Singaporeans feeling broke together with you. Here's why we look rich on paper but are actually not.
Property and CPF make up a large proportion of the average Singaporean's wealth
Part of the reason personal wealth seems so high is because property is so darned expensive. If you've bled every single cent from your life savings, CPF account and salary over the duration of your 30-year mortgage to pay for a $500,000 resale flat, at the end of that mortgage your household wealth is officially at least $500,000 (assuming you have no other loans pending repayment)-even if you have $0 savings and are eating cardboard.
While the CPF system does stop those Singaporeans without self-control from spending all their money on alcohol and designer handbags, it also means that this "wealth" is technically locked away for most of a person's life, unless he or she uses it to buy property.
Furthermore, the study measured "household" wealth per adult. Most Singaporeans live in housing that is owned by somebody in the household, and the value of that property is divided amongst all the adults living in it.
So if you're living with your parents at the age of 40 in a home they bought 50 years ago, you would on paper have a higher household wealth than someone with the same net worth who was renting a home somewhere else.
Wealth inequality raises the average wealth
Don't feel bad for being "below average" if you haven't achieved the average household wealth of $394,000. That doesn't necessarily mean that more than half of the people in Singapore are wealthier than you.
The median wealth in Singapore is actually a much lower, at just 140,000 SGD. That means that roughly half of Singaporeans have more than that, and roughly half have less. This is about half of the average household wealth of 394,000 SGD. This also means that there are some very rich people pulling up the average.
Officially, wealth distribution in Singapore is "moderately unequal", and subsequent reports have been quick to point out that we aren't the worst in the world when it comes to income inequality-countries like the US and Switzerland (the latter being yet another famous destination for billionaires hoping to hide their wealth) are worse. There are also those who argue that the trickle-down effect means that courting billionaires to settle down in Singapore will improve the lives of ordinary people.
Whatever the reasons, the wealth gap makes it clear that the "average" Singaporean is nowhere near as well-off as the average wealth figures might indicate.
High cost of living lowers purchasing power
Singapore households officially have more money than households elsewhere in Asia, slightly more than households in Japan and Taiwan.
But that doesn't mean we have more purchasing power than they do. We may have more money in real terms, but we also end up paying a lot for things like housing and transportation (for those who don't have cars, the MRT is cheap, but the lack of post-midnight transportation options means you can end up spending quite a bit each month on cabs).
It's thus important to take these reports about wealth with a pinch of salt. Just because the amount of wealth you've managed to amass surpasses that of the average person in most countries around the world doesn't mean you should pat yourself on the back and then hit the nearest Chanel boutique.
It's clear the recent reports about our supposedly high average wealth sound more congratulatory than they really should be. It's worth remembering that no matter where you stand on the scale, there is a lot you can do to shape your own financial future.
The article first appeared on MoneySmart.
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