Monday, September 15, 2008

Saving Smartly

Once, one could create an online saving account such as e$aver with Standard Chart Bank at 2.45% interest rate.

That was three years ago. Since then, the interest rate has fallen dismally. This is the best time for borrowers but also the worst time for savers! A check at local bank reveals the following rate: a measly 0.25%! Even e$aver now offers only 0.5% (exclusive of current promotion). Just a slight improvement from the banks.

So what can we do when the banks are giving us peanuts for our money and the inflation is so high? We have to take it upon ourselves to find alternatives.

If you have more than $5000, Maybank online saving account,
isavvy, offers a good deal of 0.88% and thereafter a 6% interest on interest (IOI) every six month. Which mean every six months, maybank will give you 6% on your 0.88% interest. That would be 0.9328% p.a. Much higher than the peanuts the ordinary accounts give.

Another attractive choice is the FairPrice Plus online (FPP) saving accounts. FPP is fairly new to the scene and is a
collaboration between NTUC and OCBC. At 1% p.a, it offers one of the best interest rates for saving accounts right now. If you opt out of paper statement, you can get 10 NTUC linkpoints for every three hundred dollars you have. You can also earn linkpoints when you get spend at certain stores with your FFP debit or credit card.

Finally, we have e$aver by Standard Chart Bank. Normally, it has a 0.5% interest for deposit of less than $50,000. Thankfully for us, they are having a special promotion. From now till the end of the year, you can have 1% in interest if the average daily balance for a month is higher than the comparison month. BUT, you can only sign up for e$aver if you're 21 years old and above.

A short summary:
isavvy - 0.9328% (IOI inclusive, for accounts of $5000 to $49,999)
Fairprice Plus - 1.0% and linkpoints
e$aver - 1.0/1.18/1.30% (promotion rate for below 50k, 50k to $199,999, above $200,000)

These are the three more well-known online saving accounts, offering better interest than the ordinary saving accounts. I personally recommend people who has low fund reserves or are below 21 to consider placing their money in there. However, they are not a replacement for investment.
The high inflation rates (6-7%) we suffered from will corrode the value of the money if we just leave it in a bank (0.25%). This is just a stop measure that we can take to protect our money partially. It is better to do something than not do nothing.

Note: Information is accurate as of 15 September 2008.

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