8 tips to earn more from your savings
Why aren't you saving enough? Maybe you are, but your money isn't working hard enough or perhaps you don't have all the information you need…until now.
So, here's some simple hacks to get the most out of your savings, tax relief, CPF and SRS accounts, and make them work as hard (or harder) than you are!
#1: A fixed interest rate isn't the best way to earn interest
It's also because most current and savings accounts pay a little more than 0%. In most years, that would get swallowed up by inflationary forces that eat into interest much faster than termites on a piece of wood.
The best thing is that you don't just have to grin and bear it.
POSB offers a bank-to-earn account that helps you earn higher interest rates if you utilise the bank for a wide range of products and services.
If you're a parent, this is a great time to put those everyday expenses to better use. We know that you're going to have to pay for tuition, extra classes, the tennis and piano lessons, books and uniforms, so why not get something back in return?
Here’s where the “do-less” magic lies. There’s no minimum salary amount, no minimum credit card spend, and no minimum investment or insurance premium amount. And if you’re 29 and below, no minimum balance is required.
The Multiplier Account offers interest rates as high as 3.8% each year. The exact interest will depend on:
- Your salary and/or dividends being credited into any DBS/POSB account, and
- The number of everyday banking services you use: DBS/POSB credit cards, the payment of home loan instalments, the purchase of insurance, or an investment amount that suits your lifestyle and savings pattern.
The more you use the bank for these everyday banking services, the more you earn in interest.
#2: Foreign currencies aren't just for overseas holidays
If you’re planning to send your children (or yourself!) overseas for further studies, you might want your money to “go overseas” with a foreign currency deposit account.
Some foreign currencies like the Australian dollar (AUD) and New Zealand dollar (NZD) can offer a higher rate of interest currently than a local fixed deposit account.
Decide if the foreign exchange rate and interest works in your favour, then choose a tenor from a month to a year.
But if all you want to do is go for a holiday, by all means! It’s even easier with a Multiplier account, because it comes with an inbuilt multi-currency feature.
#3: Bonds. Singapore Savings Bonds.
Singapore Savings Bonds are backed by the Singapore government and are meant to be suitable for most – if not, every types – of investors. The bond, or SSB for short, is designed to complement other types of investment instruments.
What's even better is that your capital is protected, and there is no penalty for early withdrawal….and the minimum investment starts as low as S$500, with the interest rate on the current bond (Jan 2020) stepping up until it reaches 2.04% if you hold it to a maturity of 10 years.
Using the Jan 2020 bond as an example, you’ll earn an average return of 1.75% each year if you hold it to maturity in 2030. An early redemption five years earlier in 2025 will earn you an average return of 1.61% each year.
The SSB should be one of your top considerations if you know you only need the money in a few years for your children's education, or for that family holiday when you visit Auntie Emily and Uncle Seng in Australia once the kids are ready to fly. POSB offers the SSB via DBS/POSB ATM machines or through iBanking.
Every month, a different SSB will be offered to investors who are citizens or Singapore Permanent Residents. Go to your DBS ATM or digibank portal and hit the "Invest" tab and you'll be directed to the SSB portal or link for investment. If you're ready, just enter the amount you wish to invest and off you go!
What's even greater about the SSB is that they are backed and issued by the Government of Singapore, which has a AAA credit rating by Standard & Poor's, Fitch and Moody's. Each bond and how much you earn is entirely transparent.
#4: CPF Hacks: Contribute and Redistribute
For all Singaporeans and Singapore Permanent Residents, you can get more bang for your buck – which you can then put back into an investment or savings vehicle (to earn even more, of course!). Here’s how you can do it. Consider a cash top-up into your CPF account, which makes you eligible for more tax relief. The more you top-up, the less tax you pay subject to a certain ceiling (there is a cap of S$7,000 tax relief each year).
That means you can channel your tax savings back into one of our savings or investment products to earn even more interest. (Note: The Inland Revenue Authority of Singapore (IRAS) offers tax relief on CPF contributions subject to a personal income tax relief cap of SGD80,000).
#5: CPF Hacks: Early bird gets the bigger worm
Here's the deal: For cash top-ups into CPF, the best time is January. Why? Your CPF interest is calculated monthly, but credited and compounded annually in December. This means the earlier in the year you contribute, the more interest you receive. For more, check out this CPF link.
#6: CPF Hacks: We are family!
You can also claim tax relief for cash top-ups to the Special/Retirement accounts of family members. For your spouse and siblings, you can do this as long as their annual income does not exceed S$4,000 per individual.
But if it’s for your parents, parents-in-law, grandparents, grandparents-in-law, handicapped spouse or handicapped siblings, there is no income threshold.
And the maximum you can claim for tax relief from contributions made to your relatives’ accounts is S$7,000 which is on top of the tax relief you receive when you top-up your own CPF account. For more, check out the deductions page from IRAS.
#7: SRS your way to more tax relief
The tax relief you receive from the Supplementary Retirement Scheme is a "dollar for dollar" scheme, meaning each S$1 you put in the SRS is eligible for S$1 of tax relief.
For Singaporeans and Permanent Residents, the SRS ceiling is S$15,300 while foreigners can place up to S$35,700 in the SRS in a year. In total, IRAS allows up to S$80,000 worth of tax relief claims from an individual.
If you're 18, and already have a relationship with POSB, simply apply online via digibank.
#8: Make your SRS investment work harder
The SRS scheme helps build up a nest egg for retirement with tax-free gains and it's possible to pay little-to-no tax on withdrawals too, on top of the relief we already touched on.
The great thing about the SRS is that you have a buffet of investment and savings instruments from POSB to choose from.
Apart from SSB and Singapore Government Securities (SGS), you can choose to invest in bonds, shares, fixed deposits, foreign currency fixed deposits, unit trusts or purchase insurance. That could potentially be higher than the 0.05% interest rate per annum on SRS balances that have yet to be invested.
And at retirement age (current 62), you're free to spread your withdrawals over 10 years. Only half your total is subject to tax and you never have to file a claim as it will be automatically filed by POSB to IRAS on your behalf.
Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.
All investments come with risks and you can lose money on your investment. Invest only if you understand and can monitor your investment. Diversify your investments and avoid investing a large portion of your money in a single product issuer.
Deposit Insurance Scheme
Singapore dollar deposits of non-bank depositors and monies and deposits denominated in Singapore dollars under the Supplementary Retirement Scheme are insured by the Singapore Deposit Insurance Corporation, for up to S$75,000 in aggregate per depositor per Scheme member by law. Monies and deposits denominated in Singapore dollars under the CPF Investment Scheme and CPF Retirement Sum Scheme are aggregated and separately insured up to S$75,000 for each depositor per Scheme member. Foreign currency deposits, dual currency investments, structured deposits and other investment products are not insured.