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It’s clear that Singaporeans understand the virtue of savings – with the Department of Statistics Singapore reporting a personal savings rate of 37.6% in 4Q 2024.
Given the strong savings habit, there’s a good chance that many of you are already optimising your savings in a high-interest rate savings account – to earn a decent return on your liquid savings.
While having a single high-interest savings account with all your cash in it may give you best bang for your buck, there may be financial sense in having a separate savings account to manage your personal finances more prudently.
#1 Avoid Overstretching
Besides typically requiring salary crediting, many high-interest rate savings accounts also come with multiple hoops, such as hitting a minimum spending or continuously having to increase your monthly account balance, that you may need to jump through to unlock higher interest rate tiers. Some of these may encourage higher spending, especially if you are just short on reaching the next interest tier.
Some of the high-interest rate savings account may also require you to invest or buy insurance with them for a higher tier of interest rates. These are actions that should be consistent with your financial goals and risk appetite and not just to earn a slightly better interest rate.
Moreover, a separate savings account can give you greater control over your monthly budget and help you better understand your spending habits. By having a separate savings account, you’re less likely to dip into other savings pots set aside for different financial goals, especially when you are tempted by an impulse purchase.
#2 Better Visualise Your Financial Goals
Having just one high-interest rate savings account can pose challenges in keeping track of different savings goals. A separate savings account that offers a decent interest rate, but without the hoops to jump, can help you organise your finances better and visualise how far along you are to meeting a more specific financial goal.
For example, you may be saving for a year-end holiday or upcoming renovation works. If all your savings reside in a single savings account, you may have to be extra prudent about managing your finances – possibly even managing excel sheets to keep track of your emergency funds or investment funds versus the shorter-term year-end holiday or upcoming renovations works you are also saving up for.
#3 There’s A Cap On How Much Of Your Savings Can Earn The High Interest Rates
Often, high-interest rate saving accounts put a cap on much of your savings get to earn the headline interest rate, even if you jump all the hoops. If you have more than the cap on the account, your remaining funds will usually earn a nominal interest return.
In such instances, having a separate savings account that offers a decent interest rate, without requiring salary crediting or other spending hoops, can potentially earn you a higher overall interest return on your savings.
#4 Enjoy Higher SDIC Coverage
In Singapore, you enjoy SDIC coverage on the first S$100,000 per person, per financial institution. This means if you open a savings account with two different financial institutions, you enjoy a deposit coverage of S$100,000 for each account.
While financial institutions in Singapore are well-managed and regulated by the Monetary Authority of Singapore (MAS), the point here is that you get to enjoy a higher overall deposit insurance coverage by merely spreading your savings across multiple financial institutions.
Manage Your Personal Finances Better With A Separate Savings Account
There are many ways to improve the way you manage your personal finances. One simple one can be to have a separate savings account – to avoid overspending, better visualise your financial goals, and even potentially earning a higher overall interest rate.
When opening your separate savings account, you should look for one that does not make it onerous to earn a decent interest rate. That usually means a savings account that requires a low initial deposit, no minimum monthly balance or fall-below fees, yet still paying decent interest rates.
For example, Singapura Finance’s Vivid Savings Account requires only an initial deposit of S$500, a minimum monthly balance of S$200 and no fall-below fees. Yet, you get to earn higher interest rates of up to 2.28% p.a. without requiring salary crediting or having to spend, invest or buy insurance with them.
Even if you do not get to earn the maximum 2.28% p.a. interest rate, savings up to S$10,000 will earn 1.28% p.a.
Source: Singapura Finance’s Vivid Savings Account
Opening the Vivid Savings Account is also conveniently available online. You simply have to be 16-years-old and above, and either a Singaporean or Singapore PR with Singpass access. You can open your account entirely online via MYINFO – and get your account in a few days.
You can fund your Vivid Savings Account via PayNow, referencing the instructions from the welcome email you receive. After receiving your account details and activating your account, you can download the SFL GO mobile banking app to check your account balance and transfer funds locally.
The Vivid Savings Account also comes with an e-wallet via a separate Vivid Mobile app, as well as a Vivid Prepaid Mastercard.
Your Vivid e-wallet allows you to activate and top up your Vivid Prepaid Mastercard – which works similarly to a debit card, except that your limit is the amount that you have topped-up into it, up to a maximum of S$3,000, rather than your full Vivid Savings Account balance.
Note that the e-wallet is where you can transfer funds between your Vivid Savings Account and your Vivid Prepaid Mastercard.
The e-wallet can act as an extra layer of safety, where you can quickly transfer prepaid funds back to your Vivid Savings Account if you lose or misplace your physical card, but also comes with an added step to make the top-ups before you need to use your Vivid Prepaid Mastercard. Another safety feature of the Vivid Prepaid Mastercard is its Dynamic CVC, again, retrieved on the e-wallet, making it safer for online spending.
Do note that the e-wallet does not reflect your Vivid Savings Account information, and you have to download the SFL GO internet banking application to check your account balances.
Nevertheless, Singapura Finance is an MAS-licenced Finance Company, and is also a listed company on the SGX – and we can review its financial statements, similar to other SGX-listed banks and finance companies in Singapore.
For those looking to separate their savings account from their salary crediting account, you can consider opening the Vivid Savings Account.
The post Why It Makes Financial Sense To Separate Your Savings Account From Your Salary Crediting Account appeared first on DollarsAndSense.sg.
