Obviously, with the Lunar New Year upon us, you would have received your fair share of red packets this year, which begs the all-important question – How can we maximise it?
We’ll go through some diverse suggestions for your consideration! After all, any extra income is always welcomed.
TL;DR: Maximising your Lunar New Year Ang Paos
Mainly, this article will be highlighting the following investment alternatives:
- Fixed deposits
- Singapore Savings Bond Investments
- Tax relief via donations to registered charities
- Personal Accident Plan Insurance
Imagine the distance your annual CNY Ang Baos could go if we were to explore these alternatives instead of the usual wholesale spending, gambling or ordinary bank deposits.
Fixed Deposits
Fixed deposits need no introduction. Offering better interest rates than most savings accounts, you can start with a minimum sum of $500.
For the uninitiated, you should compare the rates across all institutions and look out for the lockout term period before depositing your money.
To get a more detailed breakdown of the pros & cons behind fixed deposits:
The table below depicts a selection of diverse financial institutions that offers Singapore Dollar time/fixed deposits. Since Chinese New Year is an annual celebration, a 12-month lockout period is selected. Do note that these rates are below Singapore’s inflation rate, but then again, at least you are doing something with your Ang Bao.
| Bank | Hong Leong Finance | ICBC | Singapura Finance | SBI | Maybank | DBS/POSB | OCBC | UOB | SCB |
|---|---|---|---|---|---|---|---|---|---|
| Minimum Deposit | $500 | $500 | $500 | $1,000 | $1,000 | $1,000 | $5,000 | $5,000 | $5,000 |
| 12 mths Interate Rate (p.a) | 0.45% | 0.50% | 0.60% | 0.60% | 0.70% | 0.95% | 0.25% | 0.40% | 0.70% |
| Interest on Maturity | $2.25 | $2.50 | $3 | $6 | $7 | $9.50 | $12.50 | $20 | $35 |
| Normal Savings Account (0.05% p.a) | $2 | $2.25 | $2.75 | $5.50 | $6.50 | $9 | $10 | $17.50 | $32.50 |
| $500 X 0.05% = $0.25 | $1,000 X 0.05% = $0.50 | $5,000 X 0.05% = $2.50 | |||||||
Friendly PSA: Remember to check directly with the respective institutions for the latest senior citizen rates, promotions and deposit requirements.
Singapore Savings Bonds
For as little as $500, SSB offers significantly better interest rates than most savings account. However, the interest rates for each month may differ slightly.
Particularly, interest rates in November 2015 were 3.83% while rates in February 2019 dipped down to 2.53%. From one investor to another, it is particularly helpful to review both historical and upcoming interest rates to get a general idea of the financial landscape. You can do so here.
Although SSB investments can be withdrawn at any time, note that the best interest returns require 10 years holding of your investment.
Donations to Registered Charities
This may come as a surprising recommendation.
Until December 2021, the government offers a tax reduction of 250% of qualifying donations. For every $1 donated to a registered charity, $2.50 would be deducted from your taxable income.
The article above covers mainly cash donations. Hence, for further information on different donation types and their respective tax deductibilities, details can be found here.
Some charities (eg. Mendaki / Community chest/ CDAC ) offer online transaction services and automatic tax deduction if you key in your IC number upon donation. However, do note that some of the charities have a minimum tax-deductible amount depending on their operational requirements. Therefore, do look out for prompts or enquire the charities of your choice prior to your donation.
Purchasing an Accident Plan
Finally, I’d suggest purchasing an accident plan. With the start of a new lunar year, you may want to protect yourself in the event of an accident. Premiums range from upwards of $80 depending on the insurer and your respective career risk profiles.
However, apart from considering the cost of premiums you should also consider the extent of coverage the plan offers. Some basic plans do not cover fractures or private hire accidents, while some offer 3 times the payout and TCM reimbursements.
Therefore, do compare across all insurers and understand the exclusions before making your decision. As with most insurance, regular premium payments are required. For that reason, consider using part of your Ang Bao each year to pay for the annual premium.
For working adults, I’d highly encourage a quick read of this article.
For soon-to-be-graduates, this article is a MUST read.
Seedly Contributor: Khairul Dzakirin Bin Rusli
Khairul does healthcare related research in the day and has a keen interest in all financial literacy contents.
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