This article is written in collaboration with DBS. All views expressed are the independent opinion of DollarsAndSense.sg
Good financial planning doesn’t just entail spending within your means. It covers everything from savings, to spending, investing, insurance and more. Good financial planning will also help you to make better financial decisions and to achieve your financial goals.
A good savings account is crucial to good financial planning. Most savings accounts in Singapore have a base interest rate of 0.05% per annum. This means that for every $100,000 you have in your bank account, you receive just $50 in interest per year.
Compare this to a high interest rate savings account that gives you 2% in interest per annum. For the $100,000 you have in your bank account, you receive $2,000 in interest each year, or about $1,950 more each year just by using a savings account that gives you higher interest rates.
But having the right savings account goes beyond just wanting to earn higher interest rates. In this article, we will explain why many aspects of your financial planning in Singapore starts with having the right savings account.
The first step to good financial health is cultivating a good habit to diligently save a portion of your income. This not only ensures that you spend within your means, but also allows you to save up for big-ticket items that you might need in the future.
The more you save in the account, the more you are rewarded in the form of higher interest. The DBS Multiplier Account is an example of a high interest rate savings account that allows you to earn up to 3.80% interest rate per annum.
To earn higher interest rates in your Multiplier Account, you will first need to credit your salary into a DBS/POSB account (this bank account does not need to be your Multiplier account). You will also need to transact in one or more of these categories with DBS/POSB: Credit Card Spend, Home Loan Instalments, Insurance and Investments.
For couples, you can choose to open a joint savings account to credit your salary into. This will allow both parties to optimize the interest received.
Having Emergency Funds
The first dollars in your savings account should go towards building up your emergency funds for rainy days.
Having emergency funds is a crucial part of holistic financial planning. These are the funds we will rely on to help us tide through challenging times when we face financial difficulties such as periods of unemployment, or when there is a medical emergency in the family that requires immediate capital on hand.
A good gauge is to set aside enough funds to support you and your family through at least six to nine months of your average monthly expenses.
There are two main benefits of keeping our emergency funds in a high interest rate savings account such as the DBS Multiplier Account. Firstly, funds in your Multiplier Account is liquid which means you can withdraw your funds at any time. Secondly, while your emergency funds sit in your Multiplier Account, you are still able to earn good interest rates from it.
Get A Good Credit Card
Once you start to earn your own keep, you can now apply for your own credit cards.
A good credit card is one that matches your spending habits and rewards you for your spending. For example, someone that loves travelling can consider getting a credit card which would reward them with airmiles for their spending.
Using your credit card in the right way can help you to save money through cashback and other benefits such as reward points and airmiles. Some credit cards also provide you with special promotions and discounts that you would otherwise miss out on without the card.
One perk of using a Multiplier Account is that there is no minimum spending required for your spending to be counted under the credit card transaction component. This makes it easier on Multiplier Account holders as they are not pressured to spend more just to earn bonus interest rates.
Protect Yourself And Your Family
No financial plan is complete without protecting yourself and your family.
After you start working, you should start buying your own insurance policies. Life insurance coverage is a crucial aspect of financial planning as the payout from these life insurance policies can provide the necessary financial support for our loved ones in our absence.
DBS offers 15 regular premium policies which Multiplier Account users can purchase. The monthly premium amount due will be recognised for the first 12 consecutive months, satisfying the insurance criteria of the Multiplier Account. For DBS/POSB customers, you can find out more about the insurance policies offered here.
Investing For The Future
As we start to amass enough in savings, we begin to consider what more we can do to grow our money more quickly. Not only do we want to preserve our wealth against inflation, we also want to invest it with the aim to grow our wealth.
Good investors don’t come about overnight. It takes years of knowledge, learning and experience to become a better investor. You can start investing by starting small to grow your confidence and experience.
New investors can start making monthly investments with as little as $100 through a regular savings plan. The aim is to start investing as early as possible and to tap on the power of compounding from a young age.
With a Multiplier Account, making investments allow you to satisfy another transaction category, potentially bumping you up to receive a higher interest rate. Your monthly contribution amount to Unit Trust Regular savings Plan will be recognized for the first twelve consecutive months.
Risk averse investors can also opt to purchase Singapore Savings Bonds (SSBs), a risk-free investment option for investors looking for a reasonable yield at low risk. SSBs satisfy the investments component of the Multiplier Account when you receive the payouts from your SSB purchases semi-annually into your DBS/POSB account. For you to satisfy the investment criteria every month, you will need to purchase 6 consecutive months of SSBs to ensure that you receive payouts in your CDP every month.
Don’t jump into the deep end of the pool when you don’t know how to swim. Read up more about the various investment products available before you start your investment journey.
Buy Your Own Home
As we grow older, we tend to take on more financial responsibilities. For example, we could start off with purchasing a house for ourselves, to have a place to call our own. When buying our own house, many Singaporeans will inevitably have to take up a home loan. Besides taking a HDB loan, you can also opt to take a loan with a bank.
For Multiplier Account users, taking a DBS home loan would satisfy the Home Loan Instalments transaction component as the monthly instalment will be recognized.
Bigger Transactions With Time
As you move along your career and start to earn more money, you will undoubtedly save more and your total monthly transactions will increase when you have more bills to pay for and more dependents to look after. Planning for your own retirement will also be something that will cross your mind when you have your own dependents.
The Multiplier Account accommodates for this increase in funds in your savings account. The Multiplier Account allows users to earn higher interest rates for up to $100,000, an increase from the $50,000 limit previously.
To get higher interest rates for the next $50,000 in your account, Multiplier Account users would have to transact in at least 3 categories. For many users, this would mean taking up a home loan with DBS, to invest or to purchase one of the 15 insurance policies available from DBS.
Additionally, the Multiplier Account does not require a minimum amount for any of the transaction categories. The only requirement is that these transactions, including your salary credited, should total at least $2,000 a month, which is relatively achievable for many working adults.
Kickstart Your Financial Planning
Get started on your financial journey with a good, high interest rate savings account such as the DBS Multiplier Account that goes beyond the traditional functions of a savings account by encouraging you to do more with your finances.
As you progress through life and take on more financial responsibilities, the Multiplier Account grows with you at every step of the way, rewarding you with higher interest rates when you satisfy more components.
Besides having a good savings account, DBS/POSB account users can also keep track of your finances through digital tools such as Your Financial GPS. Your Financial GPS helps you to analyse your financial health by keeping tabs on your cash flow and helping you keep track of your financial goals.
Having a good savings account sets the tone and structure in place for you to achieve more financial goals, making it a great first step towards successful financial planning.