This article was written in partnership with UOB. Views expressed are the independent opinion of DollarsAndSense.sg
By now, most of us would already be familiar with the importance of having a good savings account that can earn us high interest on our savings. With several such options in the market, earning interest of 0.05% per annum (p.a.) on our savings and emergency funds just shouldn’t cut it anymore.
As you may know, most high interest rate savings accounts in Singapore usually require us to meet certain criteria in order to earn bonus interest. One of the most common requirements of these savings accounts is to credit our monthly salary, usually also subjected to a minimum of $2,000, via GIRO.
While it may be relatively simple for many salaried employees to get their HR departments to do this, those without traditional jobs or fixed monthly salaries may be discouraged by this barrier.
That’s because 1) we may not receive our income at regular intervals and 2) even if we do, our payment is going to be in the form of a (or multiple) cheque(s) or bank transfer(s), rather than a single salary deposit via GIRO.
Due to this, workers in the gig economy (i.e. freelancers, self-employed) will find it very difficult to earn this bonus interest from their savings accounts on a regular basis.
Aside from resigning themselves to paltry interest returns, what else can this seemingly ignored segment of the population do? Fret not! Enter: the new UOB One Account.
The UOB One Account
For the past few years, the UOB One Account has been one of the most popular high interest savings accounts in Singapore. Financial bloggers such as HeartlandBoy have written extensively about how it works, and how they have personally leveraged on their accounts to good effect. This was even before its most recent update, where UOB revised its interest rate upwards, starting from 1 August 2018.
Another highlight of the UOB One Account that hasn’t been discussed much is how it may easily be the perfect savings account for those who are working in the gig economy.
As explained, most freelancers and self-employed individuals may not be able to enjoy the UOB One Account to full effect, as they rarely earn a steady or regular monthly pay cheque like the majority of the working population do. This segment of workers typically includes freelance writers, designers, entrepreneurs, real estate agents, financial advisors, drivers and of course, just about anyone who is self-employed.
To understand why the UOB One Account works well for them, we need to first understand the bonus interest structure for the UOB One Account.
If you are an existing UOB One Account user and are confused over why the figures look different from what you are used to, that’s because UOB has recently adjusted their interest rate upwards. You can get more details on its latest changes here.
An individual with savings of $75,000, and who is able to meet both criteria (minimum spending of $500 plus three GIRO payments each month), now stands to earn annual interest of $1,827, or an Effective Interest Rate (EIR) of 2.44%.
Firstly, to qualify for bonus interest, you have to achieve a minimum spend of at least $500 on your UOB One Card (which by itself, is a great card to own anyway based on the reviews from our readers) 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
For most folks, including freelancers and self-employed individuals, spending a minimum of $500 on their UOB One Card and paying three bills monthly via GIRO (Option A) should be relatively achievable.
All you need to do is to think about the numerous bills and recurring expenses that you need to fork out for each month. These can easily add up to over $500 each month, and may include:
> Utility Bills (e.g. SP services)
> Membership subscriptions (e.g. Netflix, Spotify, gym membership)
> Telco bills (including broadband and cable TV)
> Petrol (payable via Credit Cards)
> Transport (e.g. Grab, cab rides) (payable via credit cards)
> Groceries (payable via credit cards)
Your Salary May Not Be Fixed, But Your Expenditures Are
While a monthly income that is stable and regular isn’t guaranteed for those in the gig economy, your monthly expenses, if managed correctly, usually are.
Even when your earnings are lumpy, depending on how quickly you are able to clinch and complete projects, what you rake in on a yearly basis and have in savings should be able to meet your monthly recurring financial commitments.
By allowing account holders to earn bonus interest on their savings based on meeting an expenditure criterion, the UOB One Account gives freelancers and the self-employed an easy way to get a piece of the action, without needing a fixed monthly salary. The interest, which could easily be more than $1,000 a year depending on the level of savings that you have, can be valuable in giving you the additional cash that you need.
Emergency Savings To Tide Yourself Through Difficult Cash Flow Months
One of the things many people overlook, unless they have experience being a self-employed individual or freelancer, is just how challenging it can be to manage your personal cash flow, especially when you need to manage the inflow as well.
Since income can be lumpy for this segment of workers, one of the best things you can do for yourself (and your career) is to ensure that you keep a sizeable level of emergency funds to tide you through challenging periods where cash inflow may be tighter.
For example, we encourage the average individual to have at least six months of monthly expenses in emergency savings. If your household expenditure is $3,000 per month, you should aim to have at least $18,000 in emergency savings.
For freelancers and self-employed individuals, having a larger buffer is important. There may be periods where your career/business may require you to dip into your reserves for support and you do not want to be caught off guard.
For example, if your laptop suddenly breaks down, you may need to cough up close to $3,000 in a very short time to buy a new one to be able to resume working. This is when having a strong and liquid emergency fund will come in handy.
With the UOB One Account, you can count on these funds still being able to earn good interest.
Of course, this isn’t to say that regular folks who earn a fixed, stable salary cannot use the UOB One Account either. They still can, and with the interest rate that is being paid, it’s a naturally good account to be using. Best of all, you can earn this high interest on your UOB One Account without even needing to credit your monthly salary to this account.
Special UOB Promotion
Get $100 when you sign up for the UOB One Account online today!
As part of their Nation of Savers campaign, if you do not have an existing UOB Current/Savings Account with UOB, you can get $100 to start your savings simply by opening an account online with UOB. This promotion is valid from 16 July to 31st August 2018 and limited to the first 53,000 new account sign ups only.