FOR the second year in a row, gig workers are spending more than what they are actually earning, and thus have had to tap their savings to cover their expenditure needs as they try to cope with the rising costs of living, a DBS study has found.

Savings for this group have dropped further and remained in the “unhealthy range”, DBS said.

The annual study was conducted in May and covered 1.2 million retail customers whose salaries were paid into their DBS accounts.

Gig workers who use online matching platforms to provide transport and delivery services are more specifically known as platform workers and comprise delivery workers, private-hire car drivers and taxi drivers.

The 2023 annual study by DBS found that the expense-to-income ratio for platform workers rose further to 112 per cent in May 2023, from 107 per cent a year ago.

This means that for every dollar of income, these workers incurred S$1.12 of expenses in May 2023 compared with S$1.07 of expenses a year before.

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In contrast, DBS Bank economist Chua Han Teng said the bank’s median customer has an expense-to-income ratio of 57 per cent, which means he spends 57 per cent of his income in May 2023.

The median customer manages to save 43 cents for every dollar of his income. However, a platform worker has not been saving any money as his income cannot cover his daily expenses, which has led him to draw upon his savings (negative savings) in the past two years.

As a result, the savings of platform workers fell further to 1.7 months worth of expenses in May 2023, from 1.9 months a year before, Chua added.

The figure is below that of the median customer who has savings of 3.5 months worth of expenses.

It is also “way below the recommended 12 months for those with unstable income streams”, said Lorna Tan, DBS Bank’s head of financial planning literacy.

In 2022, there were 88,400 platform workers in Singapore, comprising about 3.6 per cent of the resident labour force.

That is a jump of 21 per cent from 2021 when there were 73,200 platform workers (about 3.1 per cent of resident labour force), according to data from the Ministry of Manpower’s annual Comprehensive Labour Force Survey.

Jenn Ong, head of credit products at digital bank GXS Bank, said platform workers typically do not draw a fixed monthly income.

Cash flow is a concern for these workers, she added, and so they may feel the impact of rising costs of living more keenly than their peers.

GXS Bank, which is backed by Singtel and Grab Holdings, aims to meet the needs of those who remain underserved by a bank, including platform workers, early jobbers and the self-employed.

Ray Zheng, client adviser at financial consultant Providend, added that these workers may not be able to cut down on daily living expenses, and so they end up saving less for their future needs during months when their earnings are low.

For many platform workers, inflation also pushes up their operating costs – Zheng cited an example of a taxi driver whose income fluctuates and yet he has to pay more for fuel.

In this instance, the taxi driver’s earnings could take a double hit – from the rise in fuel costs to run his taxi and from the rise in his daily living expenses – leaving him with less take-home pay.

Food stall owner and freelance food delivery rider Fadzil Alip dipped a little into his emergency savings recently.

As a result, Fadzil’s savings have dropped below four months worth of expenses, but he is working on building the amount up to six months of expenses.

The 27-year-old does food deliveries for foodpanda five days a month and manages to earn an average of S$100 to S$150 for each day of freelance delivery work.

He said the additional income from food delivery helps to supplement the earnings from his business, Charr’d The Hawker, and pay for his daily petrol expenses and meals.

Financial advisers generally advise an individual to set aside emergency funds worth three to six months of expenses.

For platform workers, Providend’s Zheng said 12 months of expenses is a good savings target because this will give them a buffer to draw down their savings during times when earnings are low.

“If they find that 12 months of expenses is too high a target, they can start by setting lower targets such as three months or six months,” he said.

“The important thing is to work slowly towards a buffer that gives them confidence to weather low earnings seasons.”

GXS Bank has a feature in its savings account called Saving Pockets, which motivates platform workers to stay on track with their savings goals and to reach each goal faster.

Each account holder can open up to eight Saving Pockets for their different financial goals and allocate funds to the different pockets, on top of having money in their main GXS savings account for their daily expenses.

Ong said the savings in each pocket has earned interest of 3.48 per cent per annum daily since December, up from 1.58 per cent when the feature was launched in August 2022. From Aug 17, GXS will further adjust the interest rate it pays on the pockets down by 0.8 percentage point to 2.68 per cent.

At the same time, the interest rate it pays on the main savings account will go up from 0.08 per cent to 2.38 per cent. Interest is credited daily, unlike other banks, which pay out interest monthly.

In this way, “customers can enjoy the benefits of compounding and they will not have to worry about losing out on their interest if they need to withdraw their funds for an emergency”, said Ong.

The GXS savings account also has no lock-in period or minimum balance requirement, so platform workers who need cash urgently can tap their savings without having to worry about incurring penalty fees.

Starting from the second half of 2024, platform workers below the age of 30 will have to contribute to their Central Provident Fund (CPF) accounts. All other platform workers can also choose to opt in to CPF.

The CPF contributions of platform workers will be gradually aligned with that of salaried workers by 2028.

DBS Bank’s Tan said all platform workers should consider contributing to their CPF so that they can earn the “attractive interest rates”.

The CPF Ordinary Account (OA) gives 2.5 per cent per annum while the Special Account (SA) gives 4.01 per cent per annum until September 2023. SA rates will subsequently be maintained at least 4 per cent per annum.

The first S$60,000 of combined CPF balances (capped at S$20,000 for OA and S$40,000 for SA) will earn an extra interest of 1 per cent per annum.

Tan said platform workers can optimise their CPF savings by transferring from OA to SA to earn higher interest rates of up to 5 per cent per annum.

She cautioned that such transfers are irreversible, which means platform workers cannot opt to transfer the money from SA back to OA if they need it for their property purchase.

Other ways to grow their CPF savings “include investing your OA savings wisely, and performing cash top-ups to the SA to reap the power of compounding over time”, Tan added.

CPF savings in the OA can be used for housing purposes while contributions to the SA are meant to bolster the retirement savings of platform workers.

Fadzil is thankful for his platform worker job – the income he earned as a delivery rider for foodpanda saw him through school and provided him with the capital to start his hawker stall.

His next goals are to save up for his wedding and to buy a home.

“Change of lifestyle, minimise unnecessary spending, cut down on online shopping. I am also trying to grow income by investing,” he said. THE STRAITS TIMES