Everything You Need to Know About Savings Accounts in Singapore - GoBear's Ultimate Guide
What is a Savings Account?
The most basic type of bank account is a savings account which allows you to deposit money and let it sit in the bank for safekeeping. Savings accounts pay interest on the money deposited with rates much lower than other high-risk investments.
A savings account provides minimal growth for the extra cash you have but it also means having a safer place to store them for availability in case of emergencies.
Why should I consider opening a savings account?
Although savings deposits don’t earn much higher rates compared to fixed deposits and other financial products, a lot of people still consider opening one due to the following reasons:
- Liquidity – Easy access to money is possible with savings accounts considering that machine withdrawals are available anywhere in Singapore. Once the need to spend money arises, you can easily use a different method of transfer like debit card withdrawal, check issuance or electronic transfer.
- Low or no initial deposit required – Fixed deposits may require at least $500 to open while most banks in Singapore do not ask for initial deposit amount. All you need to be is at least 16 years old
- Daily interest earnings – Savings accounts interest earnings are done on a daily basis although are credited and reflected at the end of every month.
- Earn rebates and cash back – Savings accounts come with debit cards which can be used to purchase dining, shopping and entertainment goods, and services. Most banks in Singapore allow you to earn benefits when you use your debit cards in buying your needs.
- Online access to accounts – Monthly statements are accessible online so any account holder can check balances anytime, anywhere.
- The lesser risk to lose cash – Using debit cards lower the risk of losing money while outside your homes. Cashless payments have eased out the buying activities of savings account holders whether online or in physical stores.
What are the disadvantages of savings accounts?
There are a few drawbacks entailed with having a savings account which you should consider before opening one. Some disadvantages are pointed out below for your reference:
- Low returns – Among other financial products, the savings account has the lowest returns. Some banks provide below 1% interest rate for the entire month which means a slow growth for your money compared when you invested it in some lucrative business opportunities.
- Minimum balance requirements – Most banks in Singapore lets you maintain an average daily limit of at least $500 to be saved from paying $2 fall-below charge.
- Withdrawal limitations – You won’t have the luxury to withdraw or cash out as much money as you want since limits are also imposed on daily withdrawable amounts for savings accounts.
- Missed opportunity – Letting your money sit on the bank means depriving it of potential earnings. Instead of allowing it to gain profits through some ventures, you are missing the opportunity to grow it exponentially.
How does a savings account work?
Depositing into your savings accounts allows the bank to use the funds and have it loaned to their customers. In return, the bank pays you interest as a compensation to your money that funded their loan facility.
Savings account vs checking account
A savings account is aimed at saving money whereas checking accounts are designed for daily money transactions. In a more detailed view, savings account typically impose withdrawal limits, requires a minimum daily and monthly balance, have higher interest rates, and entailed with internal online transaction facility. On the other hand, checking accounts have no withdrawal restrictions, come with minimal or no interest earnings, and tied up with other banking facilities like overdraft and external online transactions.
What is compounded interest?
Compounded interest is the interest earned from the initial principal and from the accumulated interest of from previous periods. Compound interest simply refers to the “interest on interest” which is much more beneficial compared to simple interest calculated on the principal amount alone.
Most savings accounts come with compensation through compounded interest.This is clearly demonstrated by the table below given that you did not withdraw any amount from your account for three consecutive months:
|Month||Opening Balance||Interest (5%)||Closing Balance|
|January||$ 1,000||$ 50||$ 1,050|
|February||$ 1,050||$52.50||$ 1,102.50|
|TOTAL INTEREST||$ 157.625|
Is my savings account balance protected?
Yes. In the event that a deposit insurance scheme member bank or finance company fails, the eligible accounts of that bank or company are insured for up to $50,000 by the Singapore Deposit Insurance Corporation or SDIC.
SDIC covers deposits in a savings account, fixed deposit account, current account and other products except for foreign currency deposit, structured deposit, and investment products.
What are factors that affect my savings account?
- Interest rates – Since the only obvious way to earn from deposit accounts is through interest payments, check for the bank that offers the highest rate.
- Daily available balance requirement – How much is the bank’s daily or monthly average balance requirement? Will it be easy for you to maintain? If you find it hard to keep up with the balance requirement, then switch to other banks to save from paying charges when your account goes below the balance limit
- Fees and charges – Some banks do not require an initial deposit but they need you to make sure your accounts are funded before month end. Some fees and charges are imposed on your account if you fail to keep the maintaining balance for your account. Withdrawal fees across different banks should also be considered so once you decided which bank to open an account with, make sure you are at ease in withdrawing money easily.
What should I consider before opening a savings account?
- Accessibility – Majority of banks in Singapore have foreign origins and their presence can be gauged through the accessibility of ATMs and branches for transactions. Before opening an account, make sure your branch is near your workplace or residence. You can check out the ubiquity of withdrawal or deposit machines for your payment or purchase activities.
- Documents required – There is paperwork involved when opening a savings account both for permanent residents or foreigners. Make sure you have valid passport, work or study visa, proof of billing, official letter from employer or school and other documents required by the bank
- Banking hours – Most banks do not operate on Sundays while others open even on weekend on extended hours. Banking in Singapore normally starts from 9:00 am to 4:00 pm.
- Online banking facility – A mobile app or online access to the account is helpful for you to check balances and analyze transactions made through your card. Online banking services are the best way for you to check when your account is compromised to fraud and unauthorized use.
- Cashless transactions – The ease of buying without having to carry cash and without going to physical stores is gradually dominating the retail market in Singapore. Cashless transactions on the NETS scheme is made for those who purchase using their ATM card. All banks in Singapore have ATM card facilities but some come with hefty charges when used.
What other benefits can I get from my debit card aside from earning daily and monthly interest?
Like credit cards, getting a savings account lets you enjoy perks when you use your card or account for the following:
- Spending – Earn as much as 2% interest per annum if you use your card to buy products online or in physical stores.
- Salary credit – Singapore banks offer 1% interest-earning per annum if your account is used to credit your monthly salary.
- Bills payment – Most accounts can now be set up to enroll company or billers that require monthly payments. Once you enroll a certain biller which gets paid through your savings account, you can earn an average of 0.25% interest depending on your bank
- Insurance – Use your savings account to pay for your investment or insurance and gain up to 1.2% per year.
- Home loan installments – Get a chance to earn an average of $30 monthly when you use your savings account for home loan repayments
- Credit card payment – Tying up your credit card with your savings account means better security and a bigger chance for you to pay your debts and save yourself from paying penalties on delayed monthly dues
These benefits may not be true to all banks and financial institutions in Singapore so better check with each bank before opening an account.
How do I open a savings account?
Different banks have various requirements when it comes to account openings but here are a few general necessities you can prepare early on:
- Passport and Employment or Study pass is required to be submitted by expats
- A document to prove the address which may include utility billing statements or bank statements
- Your national insurance number or home tac
- Phone bill which is less than 3 months old
- Bank statement
- Rental agreement
- A confirmation of employment
It is best to reach out to any bank representative to make sure you have a valid list of documents at hand before applying for savings account opening.
Can I open a savings account before arriving in Singapore?
As mentioned earlier, most banks in Singapore have a foreign origin. ANZ, Citibank, Standard Chartered and HSBC are a few banks with branches all over the world. Having an account with an international bank can make it easier for you to open a Singapore bank account. The banking convenience comes with a large minimum deposit and an in-credit balance maintenance requirements. You may also opt to wait until you are in Singapore to avoid having to comply with these requirements.