Cash management plays an important role in the whole financial planning process, simply because if you keep too much cash idling in your bank account, inflation catches up with it and if you keep too little cash, you might have to liquidate/fire sale your investments/assets should the market crash (and especially if you are leveraged or on margin account).
As with many financial planning guidelines, the rule of thumb is to maintain a liquid cash level equating to at least 6 months of your expenses in a bank account. So, assuming you spend $6.5K (in case you are wondering, this "magic" number was derived from a recently study on household budgets) every month, you will need at least S$39k+/- in the form of liquid cash for emergency funds.
So, for the purpose of this aspect of the financial planning process, I will not be touching on short term endowment plans that will lock up your cash. I will just focus on the available high(er) interest rate savings account that are currently available in the market.
1. My personal favourite - BOC Smart saver
Minimum deposit amount: S$3,000
Minimum amount balance to maintain (prevent fall below fee): S$3,000
In my opinion, I think this is the best savings account in the market because it does not require you to hit any minimum monthly spending nor purchase their insurance/investment product just to acheive the interest rates provided below. However, the only criteria is that you have to link this Account to the BOC PayNow Service using your Mobile Number for the receipt of incoming funds. I find this only criteria very simple and reasonable as most Singaporeans would be using PayNow these days. Gentle reminder to double check/verify with BOC that your PayNow registered with this number is effectively in force (after you are done setting up/transferring) because if this criteria is not met, BOC will not award the qualifying interest.
I have worked out the effective interest rate in the last column in the table below and personally, I'd think it makes sense to park a maximum of S$80,000 into this bank account just to achieve the "optimal" (highlighted in yellow below) effective interest rate of 0.88% because any amount above S$80,000 will only earn you 0.6% (I am saying this because I assume you will want to park your "excess" cash into another account that earns you more than 0.6%.)
2. CIMB Fastsaver account
Minimum deposit amount: S$1,000
Minimum amount balance to prevent fall below fee: Nil
Secondly, CIMB Fastsaver account (they have another similar sounding savings account - Starsaver account that has a lower interest rate) offers pretty decent interest rates on their savings account. However, this comes with a criteria of having to sign up their Visa signature credit card. Personally, I am not a big fan of savings account that comes with terms & condition. So I presented the two different scenarios of not having to sign up for any card versus having to sign up for (ANOTHER) credit card just to hit the higher interest rate tier.
If you do not mind signing up for their credit card, it makes sense to park S$10,000 into this Fastsaver account to optimise the interest rate of 1%.
Next, below is effective interest rate for CIMB Fastsaver savings account without having to sign up for credit card:
One plus point about this savings account is that there is no minimum fees to maintain. So in case you need to activate your funds in your war chest during a market crash (buy the dip, buy the dip!!!), maintaining a minimum balance in this account will be the least of your worries. One thing I hate is being accidentally slap with a fall-below fee for failing to maintain a minimum balance whenever I move funds around. I'd feel cheated - like somebody took a bite from my burger when I wasn't looking, without my permission.
Speaking of high interest rate bank account, many would also propose DBS multiplier account. But I didnt list it as the "best" above because it comes with criterias (far too many, in my opinion) to hit the highest tier. There's many things to monitor and watch over in my life, and I figured that trying to hit that highest tier for a savings account is low on my priority list. For those who are keen (and doesn't mind the mental work), here are the copy and pasta summarised terms & conditions:
If you are interested to read up more on financial/retirement planning, I have previously written a related article on retirement planning here (you can download the free monthly cash flow planning template that I have uploaded in google docs in that article).
For latest fixed deposit rates, please click here
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