We’re only a few months into 2023 but my wallet is already feeling the effects of the recent GST rate hike. In addition, the slew of ongoing global and local job cuts, especially in the tech industry, is worrying — given that a few of my friends have been affected.
Indeed, the probability of not having any income for an indefinite period has been weighing on my mind.
Fortunately, the emergency fund I had set aside for situations as such is enough to tide me over for 4 to 6 months, in the event I lose my livelihood (touch wood). Of course, I’d need to adjust my lifestyle and make more prudent decisions on how I spend my money.
Whether it’s retrenchment, finding yourself unable to work because of sickness or having to take care of your family during an unexpected crisis, unforeseen events can happen to anyone. Even modern-day challenges such as having to replace a faulty laptop or smartphone can potentially set us back too.
The question now is, how much should one have in their emergency fund? As advised by MoneySense, Singapore’s national financial education programme, it’s recommended to set aside 3 to 6 months of your monthly expenditure to have some breathing room in the event of a financial shock.
However, what I’ve learnt is that an emergency fund alone may not be effective enough. I used to store this money as cold, hard cash, in my drawer. But I realised that when I let it idle in this manner, it generated zero returns for me — worse still, its value could be further eroded by inflation. Simply put, the value of your money decreases and you can afford less than before.
At the same time, I made sure not to risk my emergency fund by placing them in volatile investments that promised high returns but came with high risks. I have seen some of my friends get “burnt” and lose their emergency savings when the stock market crashed during the pandemic. They thought that stocks of big companies were ironclad investments. More often than not, these investments do not guarantee that you’ll get more than your original amount and it’s even possible to lose it all (and more).
Here are some tried-and-tested ways that you can better save for this nest egg.
1. Grow your emergency fund
Did you know that you can grow your emergency fund AND get returns on it? That’s one way to stave off the effects of inflation.
For starters, I put mine into the Singlife Account, an insurance savings plan.
The Singlife Account is offering a promotional 2% per annum^ base return on the first S$10,000. Those new to the Singlife Account can even get a S$10 sign-up bonus.
Get even higher returns when you take part in the following:
Take part in the Singlife Sure Invest Bonus Return Campaign and get an additional 0.5% p.a.* bonus return on top of the 2% p.a.^ base rate.
Take part in the Singlife Account Top-Up Campaign and get an additional 0.5% p.a.* bonus return when a minimum net top-up of S$800 is made during each top-up period.
Take part in the Singlife Account Special Incentive Campaign, where the first 1,000 customers for each qualifying period to fund and maintain the amount for 12 months can receive a cash bonus after 1 year.
Top up amount of ≥ S$10k – Cash Bonus S$50
Top up amount of ≥ S$30k – Cash Bonus S$430
Top up amount of ≥ S$50k – Cash Bonus S$810
*On first S$10K.
Taking advantage of the campaigns, I signed up on 1 April 2023 and funded my Singlife Account with S$10,000.
By maintaining this amount for 1 year and participating in the above campaigns, I’m expected to earn:
2% p.a.^ base return
0.5% p.a. bonus return from Singlife Sure Invest Bonus Return Campaign
0.5% p.a. bonus return from Singlife Account Top-Up Campaign
After 12 months Cash Bonus from Singlife Account Special Incentive Campaign
Total earned after 1 year (31 March 2024)
S$360 — on top of my S$10,000!
2. Save up gradually, but consistently
If you’ve just started working or have many commitments, it’s tough to set aside a lump sum that will serve as your emergency fund.
One way is to save up a percentage of your salary each month so you can eventually work towards building your emergency fund — slow and steady wins the race!
According to gurus, it’s recommended to save 20% of your salary — where 50% of the salary goes to necessities and 30% goes to your “wants”. You can even opt to save more of your salary by forgoing money from your “wants” expenses (but I can’t do without these life’s pleasures).
Following this framework, I should be saving S$800/month based on my take-home salary of S$4,000. Some months I manage to save more by eating out less; whereas for months with festivities, such as Christmas, I saved a little less. But all’s good since I have an amount to work towards.
In this case, the Singlife Account can be a good place to put your savings into, because it doesn’t penalise you for your slow but steady additions to your emergency fund. In fact, you’ll earn daily interest on your savings. So, in essence, it functions as a source of passive income.
What’s more, you only need S$100 to start earning returns from your Singlife Account. This is definitely possible for those who cannot commit to saving large amounts yet.
3. Rainy days are OK, keep calm and carry on
An emergency fund is meant for rainy days. We shouldn’t feel guilty about dipping into the piggy bank if the situation calls for it. For example, emergency repairs for the home, having to send the car to the workshop due to an unexpected incident, these are all valid unplanned and emergency expenses.
Again, the Singlife Account pulls through as it has no lock-in period. Unlike other insurance savings plans that have a lock-in period, you can withdraw money from the Singlife Account when you really need it, with no penalty or fees. There’s also no need to worry about your Singlife Account dipping below a certain balance as there is no minimum balance to maintain! Simply have at least S$100 to continue reaping those returns.
Also, unlike stocks that can be rather volatile, the Singlife Account is capital guaranteed, so you will still retain your capital no matter what.
Returns for the Singlife Account are calculated based on your daily account value and credited on the first day of the following policy month (which is great, as you will not earn lesser return for that entire month or week if your balance dips for just 1 day).
If you haven’t started building your emergency fund or have left your cash in a savings account for too long, consider kick-starting the creation of this important nest egg and begin growing it.
In addition to the promotional base rate of 2% p.a.^ on the first S$10K among other bonuses, the Singlife Account offers ultra-liquidity with no lock-in, no fees and only requires a minimum of S$100 to start.
New users enjoy a S$10 sign-up bonus credited to their Singlife Account. Visit Singlife to sign up now.
^Promotional base return for first S$10,000 only. For amounts above S$10,000, up to S$100,000, enjoy promotional base return of 1.4% p.a. Available from now until such time as updated by Singlife.
This policy is underwritten by Singapore Life Ltd. (“Singlife”).
The content on this page is published for general information only and does not have regard to the specific investment objectives, financial situation and particular needs of any specific person.
You may wish to seek advice from a Financial Adviser Representative before making a commitment to purchase the product. If you choose not to seek advice from a Financial Adviser Representative, you should consider whether the product in question is suitable for you.
The Singlife Account is an insurance savings plan. It is neither a bank savings account nor a fixed deposit. For disclosures under the Payment Services Regulation 2019 for the Singlife Account, please refer here.
This material is not an insurance contract. Full details of the standard terms and conditions of the policies can be found in the relevant policy contracts.
Protected up to specified limits by SDIC. This advertisement has not been reviewed by the Monetary Authority of Singapore. The information is correct as at 2 May 2023.
This post was written in collaboration with Singlife. While we are financially compensated by them, we nonetheless strive to maintain our editorial integrity and review products with the same objective lens. We are committed to providing the best information in order for you to make personal financial decisions with confidence. You can view our Editorial Guidelines here.
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