This is part of a series of posts that will explore a number of firsts in the life of a fresh graduate.
You probably already have a savings account, one that was created years ago while you were still in primary school. But changing your savings account can potentially benefit you.
Now, this post might be a little bit controversial at first, but I am asking you to consider creating another savings account. In fact, I manage 4 accounts with 3 banks for a variety of different uses; one for salary credit and channeling money around, one for savings, one for spending and one for investing.
There are plenty of articles out there on the best savings accounts to create, for a variety of spending and savings habits, budget and salary. Nobody has the time to do so much homework, or sieve through hundreds of irrelevant articles that discuss products that aren’t useful to a fresh graduate.
That’s why this post is for you!
I want to share a few ideas in a non-biased and non-sponsored manner, so that you get the best out of your money. I already took the dry and painful research away so that you can focus on what’s most important. Ready?
DBS Multiplier Account
After hours of research, years of moving money between accounts, the DBS Multiplier account is currently (in my opinion) the best account for fresh graduates.
This is my main salary credit account. My salary goes into this account, and they form the basis of my money distribution to my other accounts. This account pays between 1.2% to 3.5% interest per annum depending on how you use it, up to $50,000 balance, and is pretty easy to obtain an average of 2% interest. There’s no minimum salary credit and no minimum credit card spend, unlike accounts like OCBC 360 and UOB One.
You do not have to credit your salary to this account, you can credit it to any DBS/POSB savings account. But crediting it to this account will give you higher interest rates on your balances, plus a way to do money distribution (which I’ll explain in the future).
Optimizing the DBS Multiplier Account
The reason why I love this account is because it does not lock you to any minimums, especially up to age 29 where you can even get away with no minimum balance.
How this account works is that you credit your salary and transact in one or more of the following categories: credit card spend, home loan instalment, insurance, and investments.
The more categories you transact in, the higher your interest.
The higher your total transaction amount across all categories, the higher your interest. Pretty straightforward right.
For a fresh graduate, the most likely categories you’d transact in are probably credit card spend and investments. Of course, you can choose not to transact in any category at all, and there are no minimums and requirements to do so. The optimal combination is to credit your salary, and transact in at least two categories. For me, the two categories are investments and credit card spending.
DBS/POSB has an attractive investment plan, called Invest Saver as part of a regular savings plan (RSP), where you can invest a regular sum of money every month into Exchange Traded Funds (ETF) without a huge initial capital and expensive brokerage fees. The minimum investment is $100 monthly and the sales charge is 1% every month, regardless of amount invested.
This topic will be explored further in future posts as I want to give you guys a proper background and introduction to it.
Nonetheless, for disclosure purposes, I contribute $200 monthly to the Nikko AM Singapore STI ETF as part of my passive investments portfolio, and simultaneously meet the criteria for higher interest rates for the DBS Multiplier account.
Credit Card Spending
If you’re a shopaholic, then credit card spend is a relatively very easy criteria to meet. But the reason why I chose the DBS Multiplier is because it is very easy to meet the credit card spend criteria.
How much you say? How about one cent?
DBS has tons of credit cards which you can apply for. They each have their perks, rewards programs and minimum criteria. But one particular card is extremely useful for take advantage of the DBS Multiplier account – and it’s the POSB Everyday Card.
It’s said to be Singapore’s most loved card – it rewards users with up to 6% rebates for certain spending. But that’s pure marketing. You know what’s the best thing about the card? It has no minimum card spend!
For example, cards like the DBS Live Fresh or DBS Safra Card have minimum spending requirements.
But what if you don’t want to spend? The POSB Everyday Card provides just that.
But there’s a catch. Remember that you must transact in the credit card category to enjoy the higher interest rates? Don’t worry, it’s very easy to hit – just pay for anything – use the card at least once that month – for coffee, for dinner, for bill payments, anything. No minimum spendings and commitments, isn’t it wonderful?
What do we have now?
I’ll give you an illustration, using their interest calculator. With a net salary credit of $2800, $1 credit card spend, and $100 investment via their RSP, you can enjoy 2% interest per annum on your deposits – that’s almost 40 times the base interest rate of your normal DBS/POSB savings account!
You can earn up to 3.5% p.a. in interest, by simply increasing your total transaction base. Credit a higher salary, or invest higher amounts in the RSPs, or spend more via credit cards. The table below illustrates the benefits.
Simple, right! Now, I am sure you have other questions in mind right now.
How does this compare to the OCBC 360 account or UOB One account?
The OCBC 360 and UOB One accounts started off being very attractive, and were the pioneers of introducing tiered interest rates based on account activity and transaction levels, rewarding more valuable customers with higher interest rates.
But, their attractiveness have gone down, as they have lowered their interest rates, require higher minimum spends, and have become more difficult to hit the higher tiers of interest rates.
For example, the latest OCBC 360 requirements require a minimum $2000 salary credit, pay at least 3 bills via the account, spend at least $500 and their investment offerings aren’t as attractive (cost wise) versus DBS.
Why do I need more than one savings account?
Having more than one savings account can help with allocating funds for budgeting, prevent over spending, setting aside funds for emergency. With only one savings account, it becomes difficult to control and keep track of transactions.
I’ll explain more in future posts.
What about the credit card fees?
It’s $192.60 per year, waived for the first year. But they usually waive them if you are nice and give them a call.
What if I love to spend money?
Good!!! There are also other cards in the market that might be more attractive, but again, they will be addressed in a different post.
What else should I know?
There is a ‘minimum’ total transaction amount of S$2000 and ‘minimum’ transaction spend in at least one of the 4 categories. If you credit your salary above this amount to any DBS/POSB account, then this threshold is already met. But to enjoy higher preferential interest rates, you need to conduct one activity in at least one of the other categories.
The beauty of this account is that when your life stage changes, e.g. you earn a higher salary or when you start increasing your spending/investing amounts, if you buy their insurance products or even pay your home loans with DBS, you have the opportunity to increase your interest rate earned on your account.
The main drawback of the DBS Multiplier is that the higher interest rate only applies for the first S$50,000 in the account. The other limitation of the DBS Multiplier account is that you can only choose either this or the POSB Cashback Bonus account, but not both.
Read more about the DBS Multiplier account here.
Do you know of any other excellent savings accounts? Let us know in the comments!
P/S: This is not a sponsored post, opinions expressed and information are subjected to change without notice.