You just finished counting your Ang Pao money after a long and tiring day of socializing and eating during the Chinese New Year. After totaling the seemingly-abundant multi-colored bills in one’s hand, you decide to take maybe 30% of the money for daily consumption usage and decide to store the remaining 70% in your POSB eSavings account.
This is where we begin today’s topic:
Where does one put their money other than their regular savings account ?
Then comes the next question,
“What is so bad about my POSB Savings account ?“
Well, we are not implying that these savings accounts are “bad”. It is indeed a safe and reliable place to store one’s spare cash instead of spending it on yet another pair of Adidas Ultraboost.
However, if one takes a peek at the interest rates of such savings accounts (OCBC frank/POSB Kids/ DBS eSavings), it is on average below 1% per annum. This is definitely way below the MAS core Inflation rate of 1.7% per annum.
There might be savings accounts such as the DBS Multiplier account which gives up to 3.5% per annum. However, you must fulfill a certain criterion such as buying their insurance, taking home loan installments and spending a minimum amount on their credit cards.
“If I shouldn’t put all my savings in the bank? Where should I put it instead”
This is where we would introduce you to the world of bonds, equities and other avenues one could invest their hard-earned savings, preventing it from getting eaten by the inflation monster.
Our recommendation is to only hold cash that you actually need inside the bank, as it is easily accessible and available for one’s daily expenditure. Different people have differing expenditures and thus, we shall not recommend a fix percentage or amount.
Now, with the rest of the money, we would recommend putting 60-70% of that into the ever-trustworthy Singapore Savings Bonds (We’ll provide a step-by-step guide in the following post). They have an interest rate of 2.16% per annum over 10 years and an additional option of withdrawing your money anytime you require it, without any penalties. (Just that one does not enjoy the maximum stepped-up interest rate).
With the other 30%-40%, we would recommend one to slowly invest that percentage on equities, other bonds, options or FX. We highly recommend one to start off with investing 5%-15% during their initial investment years so as to reduce the damage caused by inexperience. Slowly but surely, when one feels that he is adequately experienced, he can slowly introduce more and more capital into his investment portfolio.
Just like our tagline
Start Younger, Prosper Faster
We hope that this would allow one to make a more informed decision regarding their personal finance!
Ready to learn more? Stay tuned for the upcoming posts for simple and easily comprehend-able methods to kick off your journey into financial investments !
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