We all know that it is important to have a savings account. In Singapore, most people have a savings account by the time they are teens or young adults. Developing good saving habits is important and your parents might have even helped you open your very first account and deposited the first sum to start the ball rolling.
While having a savings account is good, having good savings accounts is even better. As you get older, your financial responsibilities increase. There are more bills to pay and more things to account for. It can be difficult to meet financial goals with just a basic savings account. Multiple savings accounts will help you to manage your cash flow much better.
Below, we outline the five savings accounts that every Singaporean can have and how you can make the most of them.
1. A day-to-day transactional savings account
This is the account you will use to receive your salary and pay bills including credit cards and utilities. It should be a high-interest savings account that allows you minimal inconvenience in depositing and withdrawing money.
This account will also be used for your emergency savings. You should aim to save between 3 to 6 months of your monthly expenses. Keeping the emergency savings in this account makes it easy to access the money when you are in a fix.
You will want to choose the account that will enable you to maximize interest on your salary. To earn a high bonus interest, many of the savings accounts listed above require that you meet certain requirements. These include:
- Your salary being credited to the account through GIRO
- Using credit cards issued by the bank and hitting the minimum monthly spend
- Using the account to pay bills via the bank’s online platform
- Investing or buying insurance with the bank
While fulfilling the criteria may seem like an annoyance, many working adults already need to do the above in one way or another. Why not do all this and benefit by getting access to high interest rates?
For example, you can maximize your interest rates with the Standard Chartered BonusSaver Account as follows:
- Have your salary credited to the account via GIRO (this should be a minimum of $3000 a month) to get 1.1% p.a.
- Have your salary (at least $3000) credited to the account and spend a minimum of $500 a month on your Standard Chartered credit card to get 1.88% p.a.
- Have your salary (at least $3000) credited to the account, spend a minimum of $500 a month on your Standard Chartered credit card and pay at least 3 bills via GIRO (this should total to a minimum of $50) to get 2.13% p.a.
In addition to the above, you must be prepared to make an initial deposit of $3000 and maintain a daily minimum balance of $3000 in your account. The bonus interest cap on the account is $100,000.
2. Investment savings account
Investing is important if you want to build wealth. This will require you to set aside some of the money you earn specifically for making investments. It is best to have a separate account for this. You can manage the money you have set aside as well as any profits for reinvestment.
For instance, if you purchase stock that pays dividends, have the dividends credited to your investment savings account automatically. You can use these funds to invest in more stocks or for other investment options and grow your wealth.
While any savings account will work well as an investment savings account, it is wise to open this account in the bank you use or intend to use for investing. Therefore, if you use DBS InvestSaver for making investments, it is best to open a DBS savings account. Not only will this make it easier to transfer money to your investment account but it can also help you maximize your interest on your transactional savings account.
For example, you can maximize your savings with OCBC Bank’s OCBC 360 Account as follows:
- Have your salary ($2000) credited to the account and spend at least $500 on your OCBC credit card per month to get 1.55% p.a.
- Have your salary ($2000) credited to the account, spend at least $500 on your OCBC credit card per month and increase your monthly balance to get 1.85%
- Have your salary ($2000) credited to the account, spend at least $500 on your OCBC credit card per month, increase your monthly balance and invest through the bank to get 2.45% p.a.
You will be required to make an initial deposit of $1000 and maintain a minimum monthly balance of $3000. The bonus interest cap for the account is $75,000.
3. Joint savings account
If you are married, you will now have a larger household to cater for. This will mean even more bills to meet. These may include mortgage if you are buying a home, telecommunication bills, groceries, dining, petrol and utility bills. If your spouse is working, you both will probably contribute towards the running of the household.
A joint savings account makes it easier to manage money that is aimed at running the household. There are two options for having a joint savings account. The first is to actually sign up for a joint savings account that has both your names on it. The second option is to use a personal savings account that has the name of only one spouse on it as an account dedicated to household expenses.
Joint savings accounts in Singapore do not provide any additional benefits. It is therefore best to simply designate the account that has the highest interest as your joint account. If either of you already has their salary credited to a high-interest savings account for day-to-day transactions, it is best to consider opening another high-interest savings account that does not require you to credit your salary to the account to maximize interest rates.
UOB One Account is a great example of such an account. The only compulsory requirement for accessing higher interest rates is meeting the minimum $500 spend on your UOB credit card every month. You can maximize your interest rates for your UOB One Account as outlined below:
- Spend a minimum of $500 using your credit card for to get 1.5% p.a.
- Spend a minimum of $500 using your credit card and credit your account with a salary of at least $2000 through GIRO to get 1.85% p.a.
- Spend a minimum of $500 using your credit card and pay 3 bills using GIRO to get 1.85% p.a.
In addition to the above, you must maintain a minimum of $1000 in your account every month. There is also a bonus interest cap of $75,000.
4. An account for transitionary savings
This is not the same as an investment account. It is an account to hold large sums of money that you plan to hold only for a specified period of time. These funds may then be transferred elsewhere.
A good example is when you plan to purchase a new home, undergo a home renovation or make any other big purchase. You can use this account to deposit savings specifically for this large ticket items. You may decide to hold the money in the account for a specified period before you make the purchase.
It is best to go with a savings account that gives a good interest rate on deposits.
For example, the CIMB FastSaver Account offers interest of 1% p.a. on the first $50,000, 1.5% on amounts between $50,000 and $75,000 and 0.60% on anything above $75,000. If you save $1 million in this account, you can earn $3,187.50 as interest on your deposit over a 6-month period.
Another great option is the POSB SAYE Account. You will get a 2% p.a. interest for consistent deposits in the account. The only catch is that you should not withdraw anything from the account for a period of 2 years. This is great if you are saving with the hope to make a purchase in not less than 2 years.
5. Multi-currency savings account
The world has shrunk with the increased use of the internet. Many people are choosing to purchase items on international e-commerce websites. You may even find yourself planning a trip to a foreign country. It makes sense to have an account that holds foreign currencies.
A multi-currency account will allow you to save money in different foreign currencies in addition to the Singapore Dollar. This makes transactions with foreign entities much easier. You will not incur the additional foreign exchange fees for conversion of your cash to a foreign currency like you would if you used your credit card while overseas. For example, some banks can charge up to 15% as foreign exchange administration fees.
DBS Multi-Currency Account (MCA) is a great option for multi-currency savings accounts. You can save money in up to 12 foreign currencies that are widely used. These include the Euro, Australian Dollar, Thai Baht, the Hong Kong Dollar and the US Dollar.
Consider opening your accounts with different banks. This will enable you to take advantage of Singapore Deposit Insurance Corporation’s (SDIC) protection of your interest. The SDIC provides protection for interest up to $75,000 per bank, per person. It therefore makes sense to spread your risk by having your accounts in different banks.
Be sure to research each account and determine the best way to maximize your interest rates and other benefits that come with the account. You will find it a lot easier to manage your finances when your money is spread out in different accounts for different purposes.