How did everyone’s New Year begin? Mine began with bumming around at home with my girlfriend. It was the best date of the year, and the fact that it didn’t cost a cent was icing on the cake. That’s right, you shouldn’t need to spend wads of cash to have a meaningful, romantic date. If your partner tells you they’re worth spending your hard earned money on, then it should be your New Year’s resolution to dump them ASAP. That’s one money myth that some Singaporeans still have.
Oh, you want to know about REAL money myths, not just advice that makes you sound like a cheapo miser? Fine. Here are 4 money myths in Singapore that you should have gotten rid of, now that it’s 2016.
1. It doesn’t matter which savings account I use
Are you still stuck with one or more savings accounts that give you a grand total of 12 cents a year in interest? Congratulations, that’s only a little better than a child’s piggy bank. Most basic savings accounts in Singapore only offer you 0.05% interest per year. Let’s put it in perspective – if you keep $10,000 in such an account for an entire year without touching it – your interest earned will be $5. That’s less than 42 cents a month. You can’t even buy a kopi-o with that anymore.
If you’re earning a salary of at least $2,000 a month, then it definitely doesn’t make sense to keep your cash in a savings account that offers you such a low interest rate. The OCBC 360 Account was introduced in 2014, offering significantly higher interest rates (currently up to 3.25% per year) that was relatively easy to obtain. It was so popular that other banks quickly introduced competing accounts – like the DBS Multiplier Account (offering up to 2.08% per year) and the UOB One Account (offering up to 2.43% per year).
The best part is, to earn these higher interest rates, you don’t need to change your lifestyle too much. Just spend at least $500 on the same bank’s credit card and credit your salary to the savings account, and you’re already on the way to higher interest rates.
2. My credit card earns me so much rewards points
The 1990s called, they want your rewards credit card back. If you’re still using your credit card to earn rewards points, then it’s time I brought you to the 21st century. Okay, let me be clear about this – there’s nothing wrong with earning rewards points, if it’s an air miles credit card and you’re converting your rewards points to miles. However, if you’re holding on to a rewards credit card – then you’re stuck in the past.
The way rewards points catalogues are these last few years, points are becoming like the Indonesian rupiah – where the zeros don’t really mean anything at all. Can you believe 1 SGD is now almost 10,000 IDR? Let’s look at DBS for example – 3200 DBS points for a $50 Tung Lok dining voucher. Putting that in perspective – you normally earn 1 DBS point for every $5 spent. That means, to earn a measly $50 voucher (which limits your dining options), you need to have spent $16,000! And that’s not in rupiah either.
It’s no wonder then, that cashback credit cards are the way to go in 2016. With competition heating up, and cards like the OCBC 365 Card, the American Express True Cashback Card and the ANZ Optimum World MasterCard offering 5% – 6% cashback for various categories, you won’t need to spend thousands of dollars to earn $50.
$50 in cold, hard cash. Well, sort of, but you get the point.
3. I’m not a big earner, I don’t have enough money for investments
With the China stock market crash, and the rest of the world’s markets feeling similarly depressed, 2015 may not have seemed like the best year for investors. But that’s actually not true for a particular group of investors – those who dabble in regular savings plans and exchange-traded funds with long-term goals. Why? Because when you’re investing a fixed amount on a regular basis, a weak stock market actually means you’re able to buy shares at a bargain, which ideally should appreciate over time.
The best part is, with regular savings plans like the POSB Invest-Saver and OCBC Blue Chip Investment Plan, you can start your investment journey with as little as $100 a month. So there’s really no excuse for not getting your investment portfolio off the ground.
4. I’ve got a good home loan rate – I don’t need to worry about the future
If you’ve been paying off your home loan over the past several years, you should give yourself a pat on the back for enjoying some of the lowest home loan interest rates ever in Singapore. Now, get ready to piss your pants, because those days are all but over.
With the US Federal interest rate finally being raised last month, we can expect home loan rates to start rising in response. This basically means, if you’re still on a SIBOR-based rate for some reason, you can expect to pay more each month on your mortgage, and that monthly repayment looks set to keep going up.
However, if you’re out of your lock-in period (usually 2-3 years after your loan began), you’re probably eligible to get what is known as refinancing. Put simply, this means you can switch your home loan to another bank in order to enjoy a more competitive interest rate. Refinancing could save you thousands of dollars, and at this point in time, it really doesn’t pay to delay.
Of course, that doesn’t mean you should just go with whatever bank offers you the lowest interest rate. Use MoneySmart’s Refinancing Wizard, and speak to our mortgage specialist (at no cost at all!) who will help you optimize your home loan.
Are there any other money myths Singaporeans still believe? Share them with us.