Since young, most of us would already have a savings account. Our parents may have helped us open our first account, where we deposited savings that we have. As we become older, our parents may do bank transfers for our allowance each month before we withdraw it via an ATM.
Once we start work, it's easy and convenient for us to continue on with the same savings account that we have been using since young. However, sticking to just one savings account isn't a good idea. That's because as we become older and take on more financial responsibilities, we should also have multiple savings account to help us better manage our savings and cashflow.
In this article, we will highlight 5 different types of savings accounts that Singaporeans should have once they start working.
# 1 DAY-TO-DAY TRANSACTIONAL SAVINGS ACCOUNT
The first thing you need to get is a high-interest, day-to-day transactional savings account which can help you earn high interest with minimal inconvenience. Such an account can be used to receive your monthly salary, pay your credit cards or other types of bills and to make ATM withdrawals from.
Your emergency savings of ideally between 6-9 months of monthly expenses should also be kept here.
It makes financial sense to keep your emergency savings in this account because you want to maximise the interests that you earn from this savings account. Traditionally, the most popular high-interest transactional savings accounts that you can find in Singapore includes the OCBC 360 Account, UOB One Account, BOC SmartSaver, Standard Chartered Bonus$aver Account and the DBS Multiplier Account.
To earn high bonus interest, most of these savings accounts would require you to fulfil certain criteria each month. They may include:
-Crediting of monthly salary through GIRO
-Hitting a minimum monthly spend via credit cards issued by the bank
-Paying of bills online via the savings account
-Invest or insure with the same bank
Understandably so, these savings accounts would require you to fulfil some of their criteria before the banks reward you with the attractive bonus interest.
While this can be a little annoying at times, the criteria are not difficult to fulfil and most working adults will already need to do them anyway (e.g. receive our monthly salary via GIRO, spending on our credit cards, paying bills online).
# 2 JOINT SAVINGS ACCOUNT
After getting married and having a household to run, you and your spouse will find yourself having a lot more bills to pay. These would include your home mortgage, utility bill, telecommunication bill, groceries, petrol and dining expenses.
To account for these household expenses, some couples would opt to have a joint savings account.
You can create this joint savings account legally - which means that the joint account has both your names on it, or simply from a conceptual point of view - which means that you just use a personal savings account but to designate it for joint/household expenses.
Since most joint savings accounts in Singapore do not give you much benefits, it might be better to simply designate one of the high-interest savings accounts to be your 'joint account'.
If both you and your spouse are already crediting your monthly salary to your own personal day-to-day transactional savings account, then you may want to consider a high-interest savings account that does not require you to credit your salary.
One such savings account that comes to mind is the UOB One Account. To qualify for the bonus interest on this savings account, you have to achieve a minimum spend of at least $500 on your UOB One Card and/or other selected UOB cards. Once you have done that, you would have met the first criteria for bonus interest.
In order to earn the second tranche of bonus interest, you have two options.
-Option A: Pay three bills monthly via GIRO
-Option B: Credit your salary (minimum $2,000) via GIRO
If option A is not possible, option B makes a lot of sense since a joint account would probably be used to pay multiple monthly household bills anyway (e.g. your credit card spend, your utility bills, your telco bill). At the same time, you get to earn bonus interest on the savings in this 'joint account'.
# 3 SAVINGS ACCOUNT FOR INVESTMENT
When it comes to investing, one of the simple things that many people don't do but which they really should, is to set aside a savings account just to manage their investment funds. This would be money which is set aside for investment or reinvestment purposes.
For example, if you buy a stock that pays you dividend, you should request for the dividends to be credited automatically to this investment savings account that you have. This way, you would know that the funds from this savings account were generated by your investment returns, and that you reinvest them into the financial markets, instead of unknowingly spending it elsewhere. Proceeds for stocks or bonds that you have sold should also be credited into this savings account.
Typically, any type of savings accounts would work well as an investment savings account. That said, there are advantages to using a savings account with a bank that you intend to or are already using for your investments.
For example, if you intend to use the OCBC Blue-Chip Investment Plan (BCIP) or the DBS Invest-Saver, then it makes sense to use an OCBC or DBS savings account.
# 4 TRANSITIONARY SAVINGS ACCOUNT
Not to be confused with an investment savings account, a transitory savings account can be thought of as a savings account that you use to receive large sums of money which you are holding for an interim period, before the funds are transferred or deployed elsewhere.
For example, if you sell your home for $1 million and are looking to purchase another apartment 6 months later, you want your funds to be deposited into a savings account that pays you decent interest, without any cap.
One such savings account that makes sense is the CIMB FastSaver Account.
If you have $1 million, you will earn an interest of $3,187.50 over a period of 6-month. This is additional interest you shouldn't be saying no to, just because you don't deposit large sum of money into the right savings account.
Besides selling a property, other occasions where you may wish to use a transitory savings account to deposit your funds is when an insurance payout is made to you, when an endowment plan or bond which you have bought matures or even when you receive your year-end bonus.
# 5 A MULTI-CURRENCY SAVINGS ACCOUNT
In our global world today where many of us are used to buying items from overseas e-commerce websites, or may find ourselves regularly travelling to different countries, it makes sense to have a savings account that allows us to hold foreign currencies.
Unlike a regular savings account in Singapore, which only accepts and holds deposits in Singapore Dollar (SGD), a multi-currency account allows you to hold multiple foreign currencies in addition to the SGD in one single account. This allows account holders to make overseas transactions in foreign currencies directly from their bank account without incurring additional foreign exchange conversion fees, which is typically charged when you use a credit card overseas (e.g. Dynamic Currency Conversion fees and banks' FX admin fees which ranges from 2.5 per cent up to 15 per cent).
An example of a multi-currency account is the DBS Multi-Currency Account (MCA). DBS MCA allows account holders to access up to 12 widely-used foreign currencies including the Australian Dollar, the Euro, the Hong Kong Dollar, the Thai Baht and of course the US Dollar.
CONSIDER OPENING SAVINGS ACCOUNT WITH DIFFERENT BANKS
Since the Singapore Deposit Insurance Corporation (SDIC) protects your interest to up to $75,000 per bank, one simple hack you can use is to open savings accounts that you need with different banks. For example, you can consider getting the following.
The list above is just an illustration of what you can (and should) do. By opening a savings account with different banks, you are able to maximise the amount of coverage that you receive from SDIC (5 X $75,000 = $375,000). This isn't to say that Singapore banks aren't safe (they are!) but our point is that since coverage that you receive is per bank per person, it makes sense to use different banks.
This article was first published in Dollars and Sense.