Have you checked out your local banks’ websites (notice the ‘s’ for the banks) and their revised interest rates for having a normal savings account with them?
If you have not… please do check them out now and come back to this post later… because if you have always depend on your savings account to plan and fund your retirement, it’s time to think twice and plan otherwise!
For The Privileged Few Who Keep Their Earnings In The Banks
I do know of a few friends and acquaintances who are earning way beyond their means and they are good with their personal finances and planning as well, therefore even though the Banks are not giving them “that good” interest rate, their own earning abilities will help them through…
But if you are still working towards being like them… you can consider taking on these few suggestions to help you make your money work harder! They are not guaranteed to work for everybody but if you are persistent enough, they may just work well for you along the way!
A Lesson First – What Does The Interest Rate Work For Your Money In The Bank?
Back when some Local Banks can still offer an interest rate of around 1% per annum, if you manage to have $10,000 with them, you can see a good $100 being given to you as a form of interest at the end of the year. And if you keep that amount + interest for another year, you will have an additional $101 being added on. May not seem significant but if you do the calculations, the additional amount will just keep increasing as long as you do not touch the money!
The additional and increasing amount that’s being given to you is due to the Magic of Compounding Returns and because of the number that’s being attached as the Bank Interest Rate.
Secondly, if you want to know how long it will take for this $10,000, you can use the Rule of 72 to calculate the estimated number of years needed with that interest rate. Simply take 72 to be divided by 1 (the interest rate) and you will simply get 72 years! Don’t look too shocked as yet!
Now… When The Local Banks Decide To Lower That Interest Rate To An Even Lower Rate
When the interest rate is lowered down to just 0.1%, your $10,000 is just making you $10 a year (instead of the usual $100) and it’s also taking 720 years for that money to double! You can look shocked now!
So is this how you want your hard-earned money to work harder for you? If not, it’s time to make some adjustments and take on some of these suggestions…
How To Make Your Money Work Slightly Harder…
#1 Put Your Money Into Fixed Term Deposits With Local Banks or Foreign Banks
You can start shopping around for Fixed Term Deposits with different banks. Not all banks offer the same interest rate throughout, so it’s advisable for you to check out the different rates being offered. For example, I have came across Banks from India (but having their offices in Singapore) that offer slightly higher interest rate as compared to local banks.
#1.5 Put Your Money With A Foreign Country
This little tip is shared by one of my clients who operates a business in Vietnam. Because he works and stays there most of the time, he is able to open a bank account over there and guess what… the interest rate for their savings accounts is, on the average, a double digit per year!
If you do have the chance to work overseas for awhile, it’s advisable to check out this opportunity! But do take note of the terms and conditions attached to it.
#2 Put Your Money Into A Single Premium Plan With An Insurance Company
You may not get a double digit interest rate but you will definitely get higher interest rate as compared to a Fixed Term Deposit, given that you are comfortable with setting that money aside for a longer time frame.
#3 Put Your Money Into A Pure Unit Trust Investment Plan – Lump Sum or Regular Contribution
There are many categories of Unit Trusts – ranging from Money Market, Bonds, Commodities, Equities to Indexes. These are all investment types and definitely carry a certain amount of risk. But from my understanding of many clients, their level of understanding and comprehension of such investment tools are getting higher, therefore the ability to understand the risk involved and the various terms and conditions is there. That’s why I will still recommend this mode of savings for people.
And if you are able to diversify and create a good portfolio, the returns may be quite significant.
#4 Put Your Money Into Stocks, Forex, Options, Private Properties
Another set of investment tools for your considerations. Similarly if you are able to understand them well and learn how to take profits, stop losses, manage risks and create your assets – these tools will definitely help to generate a significant amount of returns for you.
#5 Create Your Own Business Or Be An Investor
I realized that many Singaporeans are slowly becoming more entrepreneur-minded and their abilities to create new business models are simply amazing. If you are one of these people, you can always set aside some of your savings, go into your own business on your own or with some partners and create your returns from there.
Or if you have an eye to spot good business, you can always be an investor to these new startups and enjoy the fruits of their labor.
As mentioned, all the suggestions here do carry some levels of risk and may depend on the markets and economies – therefore nothing is guaranteed! If you have any interests in any of the suggestions, do educate yourself well before going into them. Lastly, it’s not that advisable to put all your hard-earned savings into these suggestions. You will always need some ready cash on hands for any emergency situations!