25 Oct The Best Bang for Your Buck: Where Should You Be Putting Your Savings
We save money for many purposes and among the many purposes; it is primarily for insurance in the event of a rainy day. Amidst the uncertainty that we face in the current economic climate, it may be even more pertinent that we better manage our savings.
According to the statistics provided by the Ministry of Manpower in 2015, the average rate of finding jobs with 6 months of redundancy for PMETs and degree holders are as low as 45%. It is therefore imperil that we save for such a ‘rainy day(s)’.
By “savings”, I refer to cash at bank and exclude any form of investments or passive income that come from such investments. Though each of us saves a different percentage of our income, the underlying concern is how we manage our savings more so than how much should we save.
Hence, where should our savings go to best maximize returns yet achieve its intended purposes of being liquid and safe?
Banks have made it simpler for us.
For some of us, we currently transact daily expenditures with our basic POSB or DBS savings accounts, which were likely created by our parents at a young age for us. With such a sense of familiarity and comfort of using that card, we even provide this account for employers to bank our salaries into this card.
However, thanks to the ever-increasing need to attract funds, banks have synthesized ‘high yield savings account’ product which provides at least 1% annual interest for transacting using the account. To illustrate, lets take a look at the calculations for the DBS Multiplier Account.
DBS Multiplier Account
For DBS Multiplier account, the minimum threshold in order to attain 1.68% p.a is to perform at least $7,500 worth of transactions. These transactions may fall under any of the above categories as step 1.
However, what if $7,500 seems a little too high? Check out the OCBC 360 Account.
OCBC 360 Account
Other alternative high yield accounts offered by competing banks include CIMB Bank FastSaver Account, Standard Chartered Bank’s Bonus$aver Current Account and HSBC Savings Plan, offering up till 2.25% p.a.
There are other alternative options such as the Singapore Savings Bond if you do not wish to perform the transactional requirements set by the high yield savings accounts. This comes with a trade off for a lower interest rate p.a.
For example, based on the latest month’s issue, we see that the highest attainable interest rate is at 2.77% after 10 years of issue. There is no requirement to hold and you may redeem at any point for a transaction fee of $2 per redemption request.
Singapore Savings Bonds (October 2016)
Lastly, there are fixed deposit schemes being offered that caters to our choice of deposit tenure and minimum placement amounts. A good website to compare the best rates offered is MoneySmart. Currently, based on the website (23rd Oct 2016), CIMB SGD Fixed Deposits Account offers the highest annual interest rate of 0.7% This rate however, is still marginally lower to the Singapore Savings Bonds.
Lately, POSB has devised a new savings plan known as the POSB Save as you Earn (SAYE) Account. It promises an additional 2% p.a on your monthly savings for the first 2 years. The illustration below shows a monthly contribution of $100 into the account.
POSB SAYE Account
All in all, there are plenty of savings schemes out there and provide many alternatives to better manage our savings compared to a typical DBS/POSB Savings account that only provides 0.05% p.a (first $10,000). So, why not head over to the bank of your preferred choice to have a chat soon!