Mysteries and Lessons from Millionaire Central

Per capita, Singapore has more millionaires than anywhere in the world. 

The average Singaporean citizen earns $39,254 USD per year. Their median annual income, according to government reports, was just $26,000 in 2011. Yet according to the Guinness compilation of records, Singapore boasts the highest concentration of millionaires per capita in the world, at 8.5 percent of their population, measured in U.S. dollars.

Can America learn from Singapore?

Perhaps. But much of Singapore’s success remains somewhat mysterious.

According to Singaporean resident, Jim Rogers (the former U.S. hedge fund manager and author of Adventure Capitalist) Singaporeans save 40 percent of their income. But it’s forced. The citizens’ prolific savings rate is due to a government enforced savings program called The Central Provident Fund. Much like a 401(k) on steroids, Singaporean employees have 20 percent of their annual salaries deducted like a tax and placed in a government investment plan. It’s guaranteed to outperform inflation and every citizen earns the same return. Employers then top up the annual contributions, adding a further 15.5 percent, putting the combined annual savings at a minimum of 35.5 percent for each Singaporean worker

The money can be saved for individual retirement, or portions of it can go towards purchasing homes. According to a speech given last year by Singapore’s Prime Minister, the country has one of the highest rates of home ownership in the world— roughly 90 percent.

In comparison, the U.S. savings rate is zero. And home ownership is down to 66.4 percent—despite significantly cheaper homes in the U.S. Most Singaporeans live in government subsidized homes, but those apartments still cost twice the median value of the typical American home, running about $320,000 U.S. per apartment, compared to about $177,000 in the United States.

The Singaporean government, like its citizens, saves prolifically. Per capita, they own more U.S. debt than any foreign country, with the exception of Luxembourg, placing 12th overall in U.S. Treasuries ownership.

And they save money in some surprising areas.

There’s no welfare in Singapore, nor Social Security. And their prison system is spartan enough to make the hardiest criminal cringe. If you want a degree (and access to a prison library) while doing time, you can forget it. Prisoners don’t even get beds. They sleep on concrete, in shared cells.

Singapore’s low incarceration spending would probably interest Laurence J. Kotlikoff, and my friend, Scott Burns. Authors of The Clash of Generations, they describe American prisons as an unfortunate growth industry, draining Federal resources. State prisons are costing, in many cases, more than educational spending.

The authors paint the U.S. government as a Ponzi scheme provider, robbing future generations of tax payers by overspending on prisons with trigger happy incarceration rates—while propping the rising standard of living for the elderly, who reap generous Social Security and Medicare benefits. They suggest that the current Federal deficit is larger than we think, based on financial commitments to the growing elderly demographic, with the bill falling on the shoulders of an ever-shrinking force of future taxpayers, who lack the ability to pay for it all.

Young Singaporeans have no such tax-based obligations to the elderly.

But there are a few mysteries.

According to World Bank data Singapore spends half of what America does on public education—relative to GDP. Singapore’s teachers are paid less than their American counterparts, and average class sizes, according to a 2002 Harvard study, are 28 percent higher in Singapore than they are in the United States. Based on comparative test results, however, the U.S. falls far behind its Asian counterpart. The country’s educational spending, it appears, has little to do with its student achievement scores.

So if it’s not educational spending, what’s the secret behind Singapore’s millionaires?

Certainly, the high savings rate dictated by the government has something to do with it. Asians also tend to be less independent, which might be one of their strengths. There’s no shame in two—or even three—generations living under the same roof. Young Singaporean professionals often live with their parents and grandparents until they can afford a home of their own. And based on a culture of filial piety, they help each other in times of need. There is no government safety net.

Forced savings rates, prisons without beds, high class sizes, low teacher pay, no Social Security and no welfare—it seems like an odd recipe for success. Is this what it takes to create the largest concentration of millionaires in the world?

You tell me. Comments are open.


Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School and Millionaire Expat: How To Build Wealth Living Overseas. My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions.

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5 Responses

  1. Beardie says:

    Good article. Two or three generations ago, Western society was like that. People saved money, and often they lived with their families. It was only after WW2 that the nuclear family, spend-spend-spend mentality got going.

  2. squasher55 says:

    Hi Andrew,

    As you know, I am both Canadian and American, and I have visited Singapore. I find this article quite fascinating….and also quite motivating. I believe that people need some hardship in life to motivate them, and having no gov''t backup to look after you in later life seems like hardship to westerners, but it is very motivating as well.

    I really like the Singaporean model…..and as a retired mathematics teacher…I know about their school mathematics scores…..outstanding. Hard work and desire are impressive qualities.

  3. sgdividends says:

    Hi Andrew,

    Nice post. Another reason which i could think of is the rich- poor income inequality, thats why per capita, singapore has the most millionaires.

    Actually, Singaporeans are asset rich, cash poor which is actually a good thing given inflation these days.

    I dsagree with you about CPF being guaranteed to beat inflation. Our CPF is split into 3 accounts. Ordinary , Special and Medisave. Only the ordinary account is 2.5% pa while Special and Medisave is 4% pa. Singapore's inflation is more than 4%. About 5% actually.

    Welcome to Singapore and keep up the good work

  4. Barry says:

    Didn't Aaron Sorkin (Facebook) also move To Singapore?

    In fact the US unveiled the “Ex-PATRIOT Act" because of this one

    Nathan Tinkler (Australian Mining) apparently moved there

    I also read recently that Gina Rinehart has purchased a couple of apartments there, so maybe many millionaires from other countries are attracted to Singapore also?

  5. kelvin says:

    as for the living together part… singles below the age of 35 cannot buy govt-subsidised properties, while private properties are way beyond the means of the average working adult, furthermore, rent could take up to a third of the average income of a young working adult. no amount of shame is gonna push them out of their parents flats.

    given that housing loans are normally repaid over a 30 or 35 years period, at age 60, coupled with CPF, a slightly well paid job compared to the average worker will yield you a million bucks in assets and cash.

    i am not going to back up my numbers and the definition of "average" though. 🙂

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