5 wealth hacks you don’t want to miss
Life hacks are all the rage these days. From using a broom pan to get water into a bucket from a small sink, to using a pencil sharpener to sharpen a straw then using it to keep your wires neat. How about the one where you can delete one word at a time simply by clicking “CTRL+Backspace” on your computer? Oh, the list goes on.
But did you know you can hack wealth? Here are some wealth hacks that you may not know about.
Wealth Hack #1: Get rewarded for loyalty
You can’t beat inflation by putting your money in a savings account. But you can look for something that allows you to earn more interest.
In the last few years, banks have been rewarding their loyal customers with higher interest rates. If you fulfil the basic requirements, each additional home loan, life insurance policy, investment trade allows you to qualify for more interest.
Consolidating also allows you to manage your money more conveniently and effectively. Now you don’t have to manage multiple accounts.
So basically, get more for doing the same thing – plus there’s less to manage.
How does it work in DBS?
- Credit your salary and/or dividends to the DBS Multiplier Account.
- Spend with your credit card, take a home loan, purchase a life insurance, make an investment transaction.
- The more you do, the higher the interest rate you'll get for your savings in your DBS Multiplier Account.
If you credit your income and transact in 3 eligible categories, you can get 2.30% p.a. on the first $50,000 and 2.50% p.a. on the next $50,000.
Wealth Hack #2: Double it up with a joint account
If you are married, you can get more interest with this simple tweak.
Here’s what you need to do:
- Open your own individual DBS Multiplier Account.
- Then open a joint account. Credit both of your salaries and dividends into it. The total amount from your salaries will be reflected in DBS Multiplier’s income category.
- Now transfer the amount you want to save from your monthly salary into your own multiplier account. Not too sure how much to put aside for your savings? You can follow the 50-20-30 budgeting rule as a guide: invest and save about 20% of your salary.
For example, Mary and John earn $15,000 per month each and credit both salaries into their joint account. Both their individual Multiplier Accounts reflect $30,000 in salary credits and they enjoy the corresponding interest rate.
If John and Mary have CDP accounts with dividend-earning stocks, they can credit their dividends into their joint account. The total dividends will be reflected in the income category of their individual Multiplier Accounts.
Wealth Hack #3: CPF top-ups for family
You can earn 4% or more on your spare cash with minimal investment risk, by topping up your Central Provident Fund (CPF) Special Account (SA) or Retirement Accounts (RA).
Pros of making a CPF cash top-up
It is an (almost) risk-free investment.
As an AAA-rated country, the Singapore government guarantees the returns of your CPF monies, no matter the state of the economy or investment climate.
It gives good returns.
Top-ups into your own SA will earn a minimum of 4% p.a. If you make a top-up for family members who are above 55 years of age, that money could earn up to 6% p.a. because:
- Everyone already gets an extra 1% on the first $60,000 of their combined balances
- For those aged 55 and above, CPF pays an additional 1% interest on the first $30,000 of their combined balances
Interest rates for top-ups
|Multiplier Account||Fixed Deposits||Savings Account|
Up to 6%
|Up to 3.8%||Up to 1.4%
(for 12 month tenor)
*Information listed above are correct as of 13 January 2020
You get tax savings.
You can claim tax reliefs for CASH top-ups to yours and your loved ones’ accounts. These include your parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings.
Amount of tax relief
Without CPF Top-up
|With CPF Top-up|
My annual income
|Top-up to Spouse SA||-||$7,000|
|Top-up to Loved one SA||-||S7,000|
|Tax payable on Chargeable Income||$7,950||$6,340|
Cons of making a CPF top-up
Are there any cons to CPF top-ups? Although you will not have the flexibility to withdraw the money anytime, what it does, is to save for your retirement. The government will then pay it out to you as a monthly allowance through the CPF LIFE scheme once you retire.
Wealth Hack #4: SRS Top-up
Another hidden gem is the Supplementary Retirement Scheme (SRS). Contributions to SRS are eligible for dollar-for-dollar tax reliefs. The exact amount you can contribute depends on your residency status. Singaporeans and Singapore Permanent Residents can contribute up to $15,300 while foreigners can contribute up to $35,700.
Note that the maximum tax reliefs that you can claim in total is $80,000.
Tax savings with SRS account
With SRS Top-up
My annual income
|Top-up to Spouse SA||$7,000|
|Top-up to Loved one SA||$7,000|
|Tax payable on Chargeable Income||$4,580.50|
And if you invest using your SRS monies, any gains you make on your SRS Investments will automatically be deposited into your SRS account. These gains are exempt from tax until you decide to withdraw the money.
There's more good news on the tax front. After you retire, only half of your SRS withdrawals are taxable for 10 years. Managed smartly, you can legally pay little or no tax by spreading your withdrawals over 10 years.
While you do not need to withdraw everything from your SRS account within these 10 years, you will still have to pay tax on half of the remaining balance.
Another tip that many people miss: if you have invested your SRS money in life annuities, you will continue to receive your annuity payouts in perpetuity, and pay tax on only half of the payouts.
First 50% of money withdrawn is taxable. The payable amount is taken from the yearly Income Tax Rate.
Tip of the day
Time your SRS contributions for later in the year.
You make your SRS contributions anytime during the tax year. If your money is already earning a high interest rate somewhere else – e.g. in a DBS Multiplier Account – and you are in no rush to invest, you might want to time your contributions for later in the tax year.
Even if you make your SRS contributions in November or December, you will still get the full tax benefit for that tax year.
Wealth Hack #5: Foreign Currency Account
If you invest in US or Hong Kong stocks, look for a bank account that can hold multi-currencies. You don’t have to convert currencies just before investing.
You can also earn interest on these foreign currencies while waiting for your target price.
It’s also useful if you shop online. For instance, if you want to purchase something on Amazon.com, you can make your purchase directly, without having to incur credit card currency conversion fees.
Deposit Insurance Scheme
Singapore dollar deposits of non-bank depositors and monies and deposits denominated in Singapore dollars under the Supplementary Retirement Scheme are insured by the Singapore Deposit Insurance Corporation, for up to S$75,000 in aggregate per depositor per Scheme member by law. Monies and deposits denominated in Singapore dollars under the CPF Investment Scheme and CPF Retirement Sum Scheme are aggregated and separately insured up to S$75,000 for each depositor per Scheme member. Foreign currency deposits, dual currency investments, structured deposits and other investment products are not insured.
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