November, 2022 - SG-Financial Advice

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Top Strategies To Get the Most Out of Your Credit Card Rewards

If you’ve been using credit cards for a while and know how to spend them wisely, then you’ll definitely become an expert in maximizing the rewards you receive from these cards in no time.

The Christmas season is drawing near, which means that it is time for us to buy gifts for ourselves and our loved ones. This means that we will be using our credit cards more frequently than usual during this time of the year and of course more reward points!

We are all familiar with the concept of cashback, in which a percentage or flat rate of a purchase made with a credit card results in a cash rebate that is either applied to your balance or linked bank account. The same thing holds true for incentives, which are converted into rewards points that may be used in the form of discounts, gift card redemption, and so on.

In other words, anything is possible with these cards. Here are some of our top ideas to help you get the most out of your credit card spending, whether you’re a newcomer to the world of credit cards or simply seeking for the most lucrative reward alternatives.

1. Diversify your cards

It’s crucial to understand the perks provided by each card.

Spending across multiple credit cards helps you get the most value for your money. For instance, If you’re trying to rack up frequent-flier miles, you should save your big purchases for a miles card, while if you spend a lot of money dining out and making purchases online, you should seek for cash-back cards that offer the highest rebates. If you have a family and you spend a huge portion of your income on things like groceries or gas, you should get a credit card that gives you rewards for your daily purchases and discounts at your gas expenses.

Before applying for appropriate credit cards, it can be helpful to create a monthly spending plan and track your monthly spendings where most of your money is going. You may rest assured that it’ll pay off and flying business class on your next overseas trip will be worth it.

2. Initiate paying off

Ultimately, we all know that the banks favor the big time spenders. If you want to get the most out of your points, you should make use of your card in purchasing expensive items you need first (e.g., refrigerator, air conditioner, and etc.). Perhaps you might want to give a family member an iPhone 14 as a Christmas gift? Or probably you have vacation plans with your friends and family? I guess it wouldn’t hurt to initiate paying off their tickets first? (just make sure you get reimbursed).

3. Add another supplemental card holder

You may choose to add your spouse or other family members as additional cardholders (rather than submitting an application for a new credit card). By doing so, their transactions can likewise be piled or added to the overall spending! Sounds appealing right? As long as you and your family benefit from greater rewards, it’s a win-win situation.

4. Join a loyalty or rewards program

Joining a loyalty or rewards program will not only help you save money, but it will also allow you to accumulate rewards, in addition to other perks. For instance, you may be eligible to receive additional cash back on top of the incentives you’ve already earned. Hence it can help you enhance your spending habits and optimize your money.

Apps like Shopee and Grab have their virtual currency in the form of coins or points you acquire – to finally gain some sort of incentive i.e. cashback, or discount off your next purchase. All of this is feasible because you keep spending MORE MONEY. In the same vein, popular apps like Shopback and Fave reel entice users with the promise of cash back or special discounts at their go-to stores.

There's no better time to shop than on Single's Day

According to Straits Times (2022), we’ll be dealing with high inflation and increase of goods prices and services tax scheduled for next year (GST). Thus, there is no better time for us to shop for deals than on Singles’ Day and Black Friday this year.

Recently, the Parliament in Singapore enacted the Goods and Services Tax (Amendment) Bill, which will raise Singapore’s GST starting on January 1. It is expected to climb to 8% from January 1 of 2023 to 9 % on January 1 of 2024.

If you’re still looking for a good deal, here are some of the popular retailer shops offering the best tech bargains on Singles’ Day or Black Friday. You can still get discounts on Nintendo, Microsoft, Apple, and other brands, so check out to see what’s available.

Amazon SG: get a deal on smart homes, phones, computers, and more (opens in new tab)
Apple SG: check out all of your favorite Apple items in one spot
Lazada SG: find huge discounts on TVs, big-name electronics brands, vacuum cleaners, and more
Shopee SG: find great deals on a variety of products, including electronics
Samsung SG: find great deals on TVs, phones, and other Samsung electronics
Microsoft Store Singapore: Purchase an Xbox or Surface laptop straight from Microsoft

Enjoy your holiday shopping!

Since the holidays only come around once a year, now is the time to make those large purchases you’ve been putting off and take advantage of the credit cards that offer the greatest rebates to maximize your rewards and other perks. As you can see, there are also benefits when you save money. Who doesn’t enjoy having the perks in return for your expenses? Certainly, we do.

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Private Medical Bills: keeping Your Out of Pocket Costs Affordable

Hospitalization, long-term care, and major surgery are often associated with extremely high medical costs.

When we choose from various health care options, it may always seem convenient to go with government-subsidized public healthcare in Singapore, especially with the high quality of treatment available there. But why do many people still choose private hospitals, and how do they afford it?

You see, there is always a trade-off between selecting the most budget-friendly option and forgoing some level of comfort, be it privacy, lack of wait time, or whatever else you can think of. While it is true that public hospitals can provide the basic medical treatment, the services offered by some private hospitals can make all the difference.

Why people prefer private hospital are based on the following:

- In public hospitals, you’ll be put on a waiting list for an appointment, see the specialist the next day, and have the surgery within 48 hours.
- In private hospitals, you have the option to choose your own doctor, whereas in public hospitals, you’ll have any doctor available to treat you.
- In private hospitals, you have the option to choose where you’ll stay. Whether you want to stay in a large room with seven other patients, or to have an air-conditioned room all to yourself.

Having the option of seeing a specialist and getting treatment quickly can be a huge boon for patients who are eager to recover quickly from illness.

How can you describe your coverage?

These are the primary types of health insurance in Singapore that cover hospitalization:

MediShield Life

The CPF Board administers the basic health insurance plan– MediShield Life. Cancer chemotherapy, kidney dialysis, and other expensive outpatient treatments are some of the expenses covered by MediShield Life. Pre-existing conditions are not a problem, as all Singapore citizens and permanent residents are guaranteed lifetime coverage. MediShield Life provides varying degrees of coverage depending on the hospital and ward you’re admitted to (B2/C kinds; those in A/B1 or a private hospital receive less coverage).

MediSave

The MediSave scheme is another government program that requires regular income deductions from people’s CPF accounts for medical expenses. You and your family can use this fund to get necessary medical care, such as surgery, hospitalization, health screenings, and insurance. Therefore, MediSave can be used to supplement what MediShield Life doesn’t pay even before you have to pay out of pocket.

Integrated Shield Plan (IP)

Your MediShield Life can be paired with an Integrated Shield Plan (IP) purchased from a private insurer. This implies that MediShield Life will pay for some of your covered expenses (the exact percentage will vary depending on the hospital and the specific ward you are in), and your insurance company will pay for the rest (according to the plan purchased). Please note that IPs in Singapore are not allowed to pay for the entirety of your hospital cost; instead, you will be responsible for a deductible and any applicable co-insurance or co-payments. You can use your MediSave funds to pay for your IP premiums (this also applies to your MediSave Life premiums).

IP Riders

At last, you have access to IP Riders. These are extra features introduced to your Integrated Shield Plan (IP) that help lower your out-of-pocket costs for medical care. The goal is to minimize the amount of money you have to spend. Depending on your policy, riders may include perks like emergency medical care, cash benefits in the event of hospitalization, and even ambulance rides. However, there is currently no other option for paying IP Rider premiums besides cash.

How does IP help you make your private hospital expenses affordable?

In Singapore, we have access to basic medical care at much reduced costs, which is an advantage for us that other countries don’t have. This means that even before our private insurance comes in, we already benefit with subsidies on our hospital expenditures through various government programs and policies.

However, hospital costs can be extremely expensive. Thus, many of us purchase a hospital plan, also called an Integrated Shield plan or IP, to reduce out-of-pocket expenditures (also called cash outlay) or to provide coverage above and beyond the basics (including private hospital treatment).

How much would your bill cost with an Integrated Shield Plan?

Because the cost varies for each medical procedure, we’ll use the five typical procedures examples shown from the MoneySmart article.

Out-of-pocket costs for five common procedures at a Singapore private hospital

See an example of breakdown of what you could expect to pay at a private hospital with or without an Integrated Shield Plan based on five common procedures.

Private Hospital Vs. Restructured Hospital

We’ll use the MoneySmart article’s sample breakdown of medical costs as an example. We’ll compare the patient’s total hospital costs at both the private hospital and the restructured hospital after surgery.

Here is an estimate of a hospital bill based on the various levels of coverage.

Because the patient stayed in a private hospital, his MediShield Life claim will be calculated at 25% of the total bill. He must pay the excess of the total bill after considering the pro-ration factor.

Assuming the patient chose to go with a restructured hospital instead. Here is an estimate of his hospital bill based on the various levels of coverage.

The patient’s MediShield Life claim will be calculated based on 43% of the bill because he stayed in a B1 ward of a restructured hospital. He must pay the excess of the total bill after considering the pro-ration factor.

Integrated Shield Comparison : Private hospital IPs & IP Riders

Comparison between a private hospital and a restructured hospital

Based on the scenarios presented above, the client’s out-of-pocket costs in a private hospital with the appropriate insurance plan is still reasonable. So, the following are some justifications why you should opt a private hospital over a restructured hospital:

Waiting time

According to the Ministry of Health, the average waiting time for admission in a restructured hospital is reported to take at least 1 to 6 hours. In contrast, private hospitals typically admit patients within the first hour of their arrival.

Comfort and privacy

A hospital’s wards come in a wide range of “classes,” or levels of comfort and privacy. For instance, in a B2 ward, you might have to share a room with up to five other patients and a common bathroom. You also might have no access to air conditioning, a private television, or even have your own choice of meals. In restructured hospitals, class A wards are afforded with enhanced levels of privacy and comfort.

Efficiency

You may already be aware of how a restructured hospital operates, where patients may have to wait weeks or months to get an appointment or a surgical slot, whereas people who go to a private hospital can somehow get treatment within the week. This is due to the fact that the restructured hospitals can service many more patients at once than private hospitals. Thus it’s really first come, first served.

If this is not the case...

Then it is certainly true that subsidies for B2 and C class wards are much higher than the insurance premiums for restructured hospitals. Some patients could enjoy the idea of being in a ward with other patients, while others would settle with a ward without air conditioning.

If you’re satisfied with basic treatment, you can choose to stick with MediShield Life alone and opt not to get an IP. You will only have access to class B2 and C wards, and pre- and post-hospitalization out-of-pocket medical expenses will not be covered.

In rare circumstances, the person may also be covered by his or her employer’s hospital insurance plan; however, this may be subject to restrictions and co-payments set by the employer, and the plan would terminate should the person ever leave the company (or retire).

Overall, it actually relies on a person’s preferences for medical treatment and the amount of money that person has set up for insurance.

Here are three tips for keeping medical coverage low-cost:

I understand if you want to go all out and get an Ip from a private hospital. Some people would prefer to pay extra to avoid using the public healthcare system, and we can all see why.

Private IPs can be quite pricey. Here are three suggestions for reducing the cost of your insurance premiums:

1. Think about whether or not you want to purchase a rider

Even if you sign up for an Integrated Shield plan, you’ll still be responsible for a portion of your healthcare costs out of pocket or through Medisave.

Similar to auto insurance excess, you’ll be responsible for a deductible (up to $3,500) and co-payment (10% of your bill) before your insurer starts paying anything. For example, you have a $10,000 private hospital bill, that’s $3,500 + $1,000 = $4,500.

Most of the aforementioned is covered by an IP “rider,” which means you only have to pay for the copay 5%. Therefore, you will need to pay a $1,000 co-payment for the $10,000 bill. However, rider premiums can be as expensive as the IP itself, and they must be paid in advance (no Medisave).

If a rider is affordable and within your price range, it’s a good idea to have one. Conversely, if you have sufficient Medisave funds or emergency cash on hand, you can get by without a rider at all.

2. Choose a panel insurer

Insurance companies are not charitable organizations; rather, they are firms that must generate a profit. Because of this, clients who file too many claims should be given an advantage of a stealthy increase in their premiums.

Customers aren’t the only ones to blame, though. When some hospitals learn that an insurance company would be paying the bill, some of them start charging excessive fees. In any case, the insurers would have to pay out a lot of money, therefore the cost would be passed on to policyholders as higher premiums.

Finding an insurance company that contracts with a panel which maintains a list of preferred healthcare providers, is the key. It is annoying to have to walk through a panel, you’re right about that. While it’s good news that the insurance is making an effort to keep costs down, it probably implies that our premiums will go up.

3. Evaluate on an annual basis before renewing

You are not required to renew your annual Integrated Shield plan after it has expired.

If you have the option to compare different health insurance policies, you should absolutely do so. Take it from someone who needs to revise this page annually: IP premiums and coverage levels do change.

However, keep in mind that if you decide to switch insurance companies, you will be subject to medical underwriting. What this implies is that any medical issues that emerged after you stopped being covered by your old insurer would be labeled “pre-existing” and will not be paid for by your new insurance.

Regardless of which insurance company you choose, your premiums will increase after a certain age. You may wish to downgrade your coverage from private to Class A if costs are a concern. (“Downgrading” is usually an uncomplicated process, but “upgrading” to a higher tier may include medical underwriting.)

Choosing an integrated shield plan based on the level of coverage you need is more significant than the cost of the annual premium.

Getting yourself an Integrated Shield Plan is simple and quick

You can afford the best care possible without worrying about out-of-control medical bills if you have sufficient health insurance. With the right Integrated Shield Plan and IP Rider, private hospitals can be affordable; an out-of-pocket fee of $700 is the same as having a one night staycation in a 5 star hotel or overseas travel. Instead of worrying about your and your loved one’s health for the next few months, why not spend this $700 on some much-needed peace of mind at a private hospital?

No idea whether or not your current insurance policy includes an Integrated Shield plan, and/or IP rider? If you want a more accurate cost estimate for hospitalization, you should definitely talk to your financial advisor to see what kind of coverage you currently have.

Money Budgeting: A Guide to Stretch a One-Income Household in Singapore

It's not easy to be the single breadwinner in a household. Paying the monthly bills for an entire family could cause both emotional and financial turmoil.

We all know how difficult it is to be the primary earner in a family, ensuring that everyone has a safe place to live, enough food on the table, and adequate money to enhance their living conditions.

The truth is that many one-income households are unable to make ends meet, while others are only just able to get by. Nonetheless, most families in Singapore enjoy a high standard of living. They can make withdrawals and make purchases without worrying about going over budget.

If your family has only one income source, it might be challenging to cover basic living expenses like rent or a mortgage, school fees for your children, food, and clothing. You may have to cut back on your savings or reorder your priorities elsewhere just to make ends meet.

However, being aware of the resources available to you and following this practical advice can have a substantial impact on your finances. To assist you in keeping your single-income household afloat, here are five money budgeting tips for you.

1. Set achievable financial goals

After deciding how much money you want to make, the next step is to create specific, measurable, and achievable goals. No actionable plan can be made without establishing a clear goal first.

You can’t expect to have a large sum of money sitting in your bank account each month without making financial goals that are sustainable and achievable to work your way up there.

On the other hand, having a specific financial goal in mind makes it easier for you to stick to a budget and build the savings that you want.

But first, you must know the difference between a “realistic” and a “pipe dream” when it comes to your financial plans.

If your goal is to “become a millionaire” or “get instantly rich,” then that’s also the same thing as promising yourself to lose 200 pounds overnight.

Aspiring to be rich is not the same as wanting to have a net worth of at least S$1,000,000 by the age of 30. Or perhaps, you want to buy a 5-bedroom resale flat, however, you just want to allocate S$200k worth of budget for a new apartment search. Thus, it requires a different benchmark.

What You Need To Do:

Having goals that are more concrete and achievable makes them less daunting and increases the likelihood that you won’t take drastic measures to attain them.

Instead of simply stating your aspiration to be wealthy, you should instead calculate the precise sum you’ll require.

Here are some examples of goals that are too vague and how they could be refined into more specific and achievable goals.

If your goals are hard figures then you’ll need to calculate them. With concrete figures to work with, you’ll know how much effort is required of you to reach your goals.

You need to make them as specific as possible to determine if you can achieve your goals.

The majority of Singaporeans wish they could stop working at the age of 30. However, after figuring out how much money you’ll need to save and invest for you to achieve it, you’ll probably realize that barring a lucky strike from Toto is definitely what you need, or else you’ll have to come up with a more practical timeline.

2. Splitting income into different categories

Knowing what you want to accomplish financially will help you divide up your one source of money into manageable chunks.

As a child, your parents presumably opened a single bank account for you. However, once you’re an adult, it’s wise to open multiple savings accounts so that you can divide your income into different buckets; and not just any savings account, but one that pays a high-interest rate and has access to sufficient funds in the event of an emergency.

Once you have determined your long-term financial objectives, you should start to open more bank accounts. By doing so, It allows you to manage the money set aside for various purposes in separate accounts.

Some of the accounts you might want to keep open are as follows:

First account: Daily expenditure. preferably one with access to convenient ATMs. This is also the account where you’ll most likely pay your bills.

Second account: a monthly paycheck. Directly deposit the savings portion of your paycheck into this account as soon as you receive it. This process can be automated by setting up a standing instruction to move a set amount of money from one account to another every month.

Third Account: Different savings goals. Saving Putting away money for a rainy day? Saving for a new car? In order for you to better track your progress, you can create separate accounts for each.

3. Don’t spend half of your savings on basic needs

Everyone has a different perception of what a reasonable proportion of one’s wage should be spent on luxuries and what should be put away for emergencies. While It’s possible to save 100 % of your monthly salary if you work extremely hard and live like a saint, it’s just not realistic for most of us.

As a rule of thumb, it is recommended for people with average income like us, to spend no more than half of our monthly earnings on basic living expenses.

When we say “income,” we mean “net income” after CPF payments have been deducted. Therefore, if your take-home pay each month is $9,100 after CPF deductions from a $10,000 monthly wage, you should spend no more than $4,550(50% x $9,100) on needs.

How do you choose a necessity? Make sure to only add things that can’t be crossed off the list, no matter how much you want to exclude them.

Unless you’ve figured out how to build your own farm and plant different crops in your backyard, you’ll need to shop for groceries regularly. But it’s not necessary to dine in a 5-star hotel every month.

School expenses for your children are an absolute necessity. However, including their wants, such as iPads, PlayStations, and baseball bats are not part of the needs.

And because we know that some people will insist that weekly party booze is essential to their mental health, we have prepared a list to assist you to understand the difference between needs and wants.

Spending no more than half of your monthly take-home pay on basics leaves you with twice as much money for discretionary purchases, savings, and investments.

4. You should not spend more than 20% of your income on things like recreation, shopping, and other wants

Try to recall the wants and needs list we made earlier.

Keeping your spending on necessities to no more than half of your salary will leave you with enough money to indulge in 20% of your income’s worth of wants and pleasures.

It doesn’t matter whether you want to spend money on expensive stuff like Starbucks, fine wine, luxury purses, 5-star hotels, or antique kinds of furniture. If you keep your monthly spending to no more than 20% of your income, you can buy whatever you want without feeling guilty.

Keep in mind that this calculation should reflect your net income after CPF withholdings, rather than getting the figure without the deductions.

If you make $10,000 per month but only keep $9,100 after deducting your CPF, you have $1,820 to spend on wants each month.

Imagine you want to take a vacation to France, which gives you a rough estimate of $8,000 to get there. However, you only bring home $9,100 each month and have $1,820 available for your wants.

Therefore, you’ll need to make sacrifices and cut back your spending on wants for a certain period in order to save up enough money to spend $8,000 in this way without having to touch the funds you’ve set aside for other uses.

5. Put the remaining 30 percent into long-term investments and savings

Now, you have spent no more than half of your salary on needs and no more than twenty percent on wants.

The remaining 30% of your net monthly income is yours to spend as you like.

This amount is best put toward long-term goals like saving and investing.

Keep in mind that this budget section is also the most crucial to your overall financial well-being, so be sure to be consistent and reliable with this allocation of funds over a lengthy period.

But there’s more. You won’t just put all 30% of it into a savings account and forget about it.

You’ll have to divide the amount into the following three parts:

- 10% allotted to emergency
- 10% allotted to insurance
- 10% allotted to investment

What you need to do:

Build an emergency fund

Put this money into a savings account for the future. You should save enough for rainy days until you have a comfortable cushion.

This fund is to be used for emergencies such as medical bills, losing your job, or for replacing your broken appliances.

You should base the amount of this fund on your own financial security.

If you have the kind of employment that’s reliable to provide all your needs and you never have any trouble staying within your monthly budget, then you probably don’t need to worry about building up an emergency fund that’s worth more than three months of your salary.

If your income is unpredictable (for example, if you’re a freelancer, private tutor, real estate/insurance agent, or work in a delivery company), it’s a good idea to save up at least six months’ worth of living expenses in case of emergency.

Once you’ve amassed a sizable rainy-day fund, you may put that extra 10% toward long-term goals like retirement and protection.

Re-evaluate your insurance

Working adults should prioritize health insurance, especially, In the event of a major illness, the cost might quickly add up, and you may not want to rely solely on public hospitals. If your illness requires hospitalization, your health insurance should cover the costs of your doctor visits, procedures, and medications.

Medisave-compatible Integrated Shield Plans are the most widely held form of medical coverage. These are supplements to your existing MediShield Life plan in which you can use the funds in the CPF Medisave account to pay a part of it.

On the other hand, having dependents such as children or elderly parents makes life insurance an absolute necessity. In the event of your death, or should you become incapacitated and unable to work, your dependents may receive a payout from your life insurance policy which may help them survive once you’re no longer there.

Some people choose to mix life insurance with investments by purchasing investment-linked life insurance plans, but you have to make sure that you’ve researched well before choosing whether it’s the right option for you or not.

After you’ve had these two important forms of insurance taken care of, and you still have money left over, you might look into getting insurance for things like critical illness or personal accidents. You may check this article to know more about the other types of insurance you may need.

Get into investments

Instead of only saving for retirement and other long-term financial goals, it’s wiser to invest so that your money can increase over time and provide you with more security.

Stocks, ETFs, real estate, unit trusts, and even Singapore Savings Bonds and fixed deposits are just some of the many investment vehicles available to you.

The earlier you begin investing, even with a small amount, the better off you will be in the long run. Due to the power of compound interest, your investment will expand exponentially over time.

Don’t delay investing because you don’t think you have enough money saved. If you’re nervous about making a large initial investment, a robo adviser can help you get into the market with a low entry point.

Now, you may be wondering, “What about cryptocurrency?” This is a risky way to put money to work; perhaps the word speculating is more apt. Even though it has the potential to yield substantial profits in a short period of time, crypto is a very risky investment. So here’s a helpful guide for you.

Final Notes:

If you are able to stick to the above budget, you will likely be meeting or exceeding the expectations of most financial planners.

The 50-20-30 budgeting guideline is a common framework for dividing up one’s income and spending between requirements, wants, investments and insurance.

Of course, this all depends on whether you’re willing and able to live on less than half of your income for essentials, less than twenty percent for wants, and more than thirty percent for savings, investments, and insurance.

This will put you in even better financial shape than those who strictly adhere to the 50-20-30 rule.

Let’s say perhaps that you can get by spending only 30% on essentials and 10% on wants while putting 60% into savings, investments, and insurance.

This implies that you’re able to meet those financial goals we discussed at the start of this article much earlier. You’ve beaten the curve!

How to Build an Emergency Fund on a Tight Budget

It’s a rule of thumb to save at least three to six months of living expenses for an emergency fund. But what if you’re on a tight budget and have limited savings?

As the name implies, ’emergency fund’ serves as a financial reserve for unanticipated expenses. The question is, how well-equipped are your emergency finances to meet an emergency situation? Emergency funds are a vital financial cushion to rely on in times of crisis and, therefore, require substantial savings.

We may never know what the future holds, especially in today’s volatile economy. One must always be financially stable and ready for whatever life throws. The first step toward a secure financial future is building an emergency fund, which requires you to prioritize your own needs financially so that you can support your family when they have financial difficulties.

What's an emergency fund?

An emergency fund is a stash of money set aside for “bad times.” It is not intended for purchasing a one-time payment of a luxury. Having this money on hand can be helpful in the event that you lose your job or need to deal with some other kind of financial emergency. You’ll be able to handle the problem without resorting to high-interest payday loans or maxing out your credit cards to cover the cost.

Anything can be considered an emergency if it’s an ’emergency.’ Have you been in a car accident recently? Water stains on your ceiling because of a leaking pipe? Have you recently lost your job and your source of income? Every unforeseen event can be considered an emergency.

Here are a few examples of when it may be wise to have an emergency fund:

Replacement of old appliances

Due to work-from-home arrangements, computers and smartphones have become increasingly in demand and have been an important part of our lives. Having emergency cash set aside ensures you can quickly and affordably replace them if they break down or get stolen.

In the event of a major appliance failure, such as a refrigerator, air conditioner, or washing machine, you will be able to pay for the necessary repairs or replacements with your emergency fund.

Health emergencies

Even if you have adequate health insurance, it is still essential to have access to emergency funds in the event of an accident or other medical emergency. Sometimes you need to pay for something out of pocket before you can file an insurance claim. Other times, you need to cover the costs immediately for a loved one but don't have access to that person's insurance details.

Life-changing medical emergencies can significantly increase our expenses. For instance, you might require assistance for a few months or need to participate in physical therapy. Having an emergency fund set up means you won't have to worry about how to pay for these extra expenses while you get better.

How much should you set aside in your emergency fund?

What types of emergencies do you wish to cover?

It is critical to be realistic while determining the nature of these emergencies. The whole point of an emergency fund is to have a cushion in case anything unexpected happens, so it would be futile to adjust your list of emergencies to reduce the amount you’d have to put in.

According to ValueChampion (2021),here are some of the estimated costs of an emergency:

Moving your home – $374
Monthly car rental – $2,119
Heart attack ER visit – $2,603
Kitchen oven – $3,400
Funeral – $5,632

Your emergency fund should be enough to cover three to six months of living expenditures. To figure out this amount, add all your essential monthly costs, like food, rent, utilities, insurance, etc.

For example:

Instead, you should not risk your primary funds on these unforeseen expenses but use a savings cushion. Therefore, even if your budget is tight, it’s essential to always set some aside in an emergency.

Consider it a self-investment
Look for account savings with high-interest rates
Check the allocation of your funds
Reduce your spending
Diversify your sources of income
Liquify your savings

Consider it a self-investment

Having an emergency fund is like receiving a bonus check from an employer; it’s a way to compensate yourself for a potential loss. That’s why it’s wise to open a separate savings account and put aside a fixed amount of money each month.

By putting the same effort into building an emergency fund as you would into your regular savings, you instill discipline and attention towards actively developing it. With a good mindset, you can make saving for an emergency fund a top priority because you will consider it a requirement rather than an option.

But if you aren’t convinced enough, consider this an investment in your future resources, giving you more safety and confidence when times are tough financially. No one wants to be caught off guard and in a position of financial helplessness.

It’s essential to replenish your emergency funds if they have been drained during the first two years of the pandemic because another economic downturn — a recession — could be on the horizon.

Take advantage of the high-interest rates

Even though interest rates have dropped at many banks over the past year, there are still some good high-yield savings account options. Generally, the starting interest rate for savings accounts is 0.05% per year. Account holders must meet the criteria to increase such figures.

A few of the most well-liked high-yield bank accounts are the CIMB FastSaver, DBS/POSB Multiplier, UOB One, and OCBC 360.

For instance, if you plan to open an account, you may wish to do so with CIM since it’s the least complicated savings account because the only requirement is to maintain a balance of $1,000 to earn the promised interest rates.

CIMB FastSaver offers one of the highest realistic interest rates for a savings account at 1.8% per year, given that you sign up with the CIMB Visa Signature card and spend a minimum of $300 per month.

On the other hand, if you credit your salary and link it with a UOB debit or credit card to your UOB One account, you’ll earn 0.5% p.a. on the first S$15,000. Quite a substantial boost, indeed!

Alternatively, DBS/POSB Multiplier and OCBC 360 also provide competitive rates of 0.4% p.a. and 0.35% p.a. at the first interest tier upgrade. However, account holders must go through additional hoops to earn a greater interest rate.

To start a savings account, you should think about your spending habits carefully.

Check the allocation of your funds

U.S. Senator Elizabeth Warren made this straightforward guideline famous in her book “All Your Worth: The Ultimate Lifetime Money Plan.” Despite its apparent Western provenance, the concept is relevant in Singapore. You can easily apply this approach by dividing your earnings into three categories:

50% is allocated to necessities
30% is allocated to wants
20% is allocated to savings

This is a simple guide that works effectively. It’s basically dividing your savings into three categories, which is as simple as that. Additionally, it guarantees that you have funds set aside for every spending category. Any spending you can imagine falls into one of these three categories.

While this is a good breakdown, some people on a tighter budget may want to adjust the allocation rate. So instead of spending 30% of your money on wants, you can replace it with 20% on savings. With the new allocation, 30% will go toward savings and 20% toward wants.

Just do the math before you argue against making that 10% cut in spending.

To reach this percentage, you must put away only S$300 more per month. This S$300 excess can be added directly to your emergency fund without disrupting your savings. Yes, it is that simple.

Depending on how much you put away each month, it should take anywhere from 20 to 60 months to build your emergency fund goal. It is strongly suggested to have extra money that can be put away each month into an emergency fund.

We advise not cutting the other 50% allotted for basic needs, as these funds are absolutely needed to maintain a comfortable standard of living and include things like food, shelter, clothing, and transportation. This is a regular and necessary outlay of funds that cannot be avoided.

Nonetheless, that doesn’t mean cutting back on necessities is impossible. Singapore’s supermarkets have a wide range of prices, products, and sales. In fact, if you’re a savvy shopper who likes to save money, online grocery shopping may be more your thing because of all the continual offers and discounts. You can try shopping at one of the popular supermarkets in Singapore— NTUC FairPrice which offers online orders and deliveries with discounts.

The best part is that you may save a lot of money with the help of a sound cashback credit card or grocery store credit card.

Develop a more thrifty lifestyle

Yes, we get that notoriously frugal people are sometimes looked down on for being stingy, significantly if they save every last cent. However, in reality, if you’re on a limited budget, difficult times will often necessitate desperate means.

Being frugal and frugal-minded is not inherently wrong. Spending less money than you earn is always a good idea.

It’s natural to want to make the most of your youth and invest in things and activities that please you when you’re young. However, this is where the trap lies: too many people indulge in wasteful spending without keeping careful financial habits.

People tend to allow too much room or justifications to be frivolous with their purchases when they aren’t closely monitored. They don’t put any money aside for emergencies and spend more than they can afford. This is why you should save up for those “just in case” moments by putting money aside regularly.

Therefore, having a thicker skin is acceptable, and looking for ways to save money whenever possible.

You can save money by not going out to eat with friends often or by dropping unused subscriptions to online video services. Forget the apparel prices and spend more time indoors.

The formation of a habit takes time. Habits are difficult to break once they’ve been established. Several specialists say that a new habit typically takes at least 30 days of consistent effort. And unless your inspiration can keep you going indefinitely, discipline is the most crucial factor in maintaining your progress.

The process might not be that easy, but what’s essential is to start out by taking baby steps and working your way up to the bigger things.

Use a variety of methods to generate wealth

Personal finance has two main goals: keeping what you have and making more of it. These ideas need no explanation, but how much do we really know about their processes?

An emergency fund is a part of the wealth preservation section while developing numerous sources of income is part of the wealth generation sector. The concepts of wealth creation typically refer to investment for the average person.

Investing for long-term growth has become a necessity in the current economic state. The first startup involves individual effort, but the money works for itself after the foundation is established.

The stability and variety of the assets in such a portfolio are two of its defining features. In the form of dividends or coupon payments, ETFs, unit trusts, blue chip stocks, mutual funds, bonds, and real estate investment trusts (REITs) all reward their investors regularly.

Keep your emergency funds liquid

In the event of an emergency, you would not want your emergency fund to be invested in illiquid or risky assets. Therefore, it’s crucial to keep your emergency money liquid so that you can access it immediately if a crisis strikes.

Money set aside for emergencies should be easily accessible. You should have access to a liquid asset that functions similarly to cash, albeit with more security features. Because when an emergency occurs, you may never be sure how much time you’ll have to get it. Therefore, you shouldn’t invest in bonds or instruments or “safely” allow your pals to keep them.

Avoid putting it somewhere you’d have to wait until business hours or go through a cumbersome process to get it. It’s preferable if you can access it in the wee hours on holiday.

To make things simple, consider opening a standard savings account with access via ATM or transfer through an app. This will keep the funds secure while allowing for easy withdrawal at any time.

Alternatively, you can put money into some types of insurance savings plans, which may offer slightly greater returns. An example is the Great SP, where you can earn high returns. It’s a great choice with no long-term commitment required.