Singaporeans are known to be savers. Some might say that it is in our blood as Asian to be such good savers. While wealth building starts with saving, some of us make the fatal mistake of saving in a low interest savings account. By keeping your money in a low-interest savings account, it can’t even keep up with inflation. So, what can we do about it?
Open your eyes to the concept of regular savings plan
Today, savings no longer have to be kept in your savings account. The banks have been putting themselves in our shoes and introduced a wonderful “savings” product known as regular savings plan. And here’s how a regular savings plan works.
For every working adult, your salary will be credited into your bank account every month. Under a regular savings plan, you will decide how much you want to allocate into your regular savings plan from the credited salary. As a general rule of thumb, allocating 20-40% of your salary will be a good financial discipline to foster. Up till this point, it sounds just like a normal savings account.
But here’s the twist. Instead of letting your allocated saving lie idly in your savings account, a regular savings plan helps you invest the allocated savings. There are a few options you can choose from. You can choose to invest in exchange traded funds (ETFs), unit trusts, local blue chips or foreign blue chips depending on your provider.
What’s so good about regular savings plan?
Unlike your usual savings account, a regular savings plan allows you to grow your savings apart from encouraging you to maintain good saving habits. This helps you build up a sizeable nest egg that you can use to retire, pay for your home loan or satisfy your wanderlust. In addition, this is an optimal solution for those who lack financial discipline, financial savviness and mental stability to invest in the stock market.
2 deciding factors to differentiate between regular savings plan
While regular savings plan used to be an “exclusive” product that was limited to a few banks/financial institutions, its popularity has been rising. Thus, more banks are now offering regular savings plan to its customers in order to not lose out to competitor banks.
- Investment options
The most common investment option under regular savings plan is unit trust. Every bank that offers a regular savings plan will allow you to invest your savings in unit trust, from local banks to foreign banks. Unless you have some financial knowledge, it is advisable to avoid unit trusts given that you have to make a choice on the type of unit trust to invest in.
The next most common investment option is ETF. OCBC, DBS, POSB, Maybank and Phillip Capital are the only service providers that offer consumers to invest in ETFs through regular savings plans. The greatest difference between ETF and unit trust is the fees and investment mandate. For the regular joe, ETFs will be your best choice.
If you have a flair for investing or willing to put in effort for research, go for a blue chip regular savings plan. These are regular savings plan that allow you to invest in specific stock counters. Right now, OCBC, Maybank and Phillip Capital are the only financial institutions that offer blue chip regular savings plans.
OCBC allows its customers to invest in 19 blue chips (click here to find out more). If you prefer more blue-chip options, Phillip Capital can provide that for you. Phillip Capital allows you to invest your savings in 28 blue chip stocks in Singapore. But if you want to be spoilt for choice, Maybank would be your preferred regular savings plan provider. This is because Maybank offers 230 stocks across Singapore, US, Hong Kong, Malaysia and Thailand for you to choose from. Popular stocks like Apple, Alphabet, Tencent and Alibaba are part of the list.
2. Fees and charges
If you have no preference over the investment options, then the fees and charges comparison table below will help you make a choice.
|OCBC Blue Chip Investment Plan||POSB Invest Saver||Maybank Monthly Investment Plan||Phillip Capital Shares Builder Plan||DBS Regular Savings Plan||Citibank Regular Savings Plan|
|0.30% of total investment amount (monthly)
$5 per counter
(whichever is higher)
|1% of total investment amount for Nikko AM STI ETF||For investment < S$1,000: 1% of total investment amount or S$1, depending on whichever is higher||For investment < S$1,000: S$6 (for less than 2 transactions) or S$10 (for more than 2 transactions)||Spread charges apply for unit trusts||Sales charge of 3% per transaction|
|0.5% of total investment amount for ABF Singapore Bond Index Fund||For investment >= S$1,000: 0.18% of total investment amount or S$10, depending on whichever is higher (SG)||For investment >= S$1,000: 0.20% or $10, whichever is higher||No charges for selling unit trusts|
|For investment >= S$1,000: 0.20% of total investment amount or S$10, depending on whichever is higher (Overseas market)||Dividend Charges: 1%, or S$1 depending on whichever is higher (capped at S$50)|
How to sign up for a regular savings plan?
Regular savings plan is designed to be easy to sign up so that more customers will be encouraged to sign up for one. If you are signing up a regular savings plan with your bank, you can request for one through your ibanking app. If you are signing up a regular savings plan with another bank, simply go onto their website and indicate your interest on their online form. For Phillip Capital, you will need to download the application form, fill it in, scan it into your email and forward it to them.