[Sharing] Optimising savings acct - in progres-

Optimising Cash Holdings

This arose from my review on net assets(here). I was holding a fair bit of cash, because i had sold a number of trading positions.

Reduce opportunity cost. It is good to have funds available for deployment in a market crash, but liquidity has an opportunity cost. For every year holding cash, there is an opportunity cost of about 3-4% if the next best choice is to hold STI ETF... (or even CPF SA or OA). Hence, there is a need to keep cash in the highest possible interest bearing account that allows you to withdraw anytime.

Finding higher interest rate accounts. I follow a handful of financial awareness fb pages. so it was easy to narrow down to that few accounts. it is actually important to be savvy that the highest interest bearing accounts may not be the best accounts that suit you! so thats why it is also very useful to keep track of your monthly expenses. For me, i spend about 700-800$ in my credit cards per month, while i have a number of giro bills (insurance,tax and credit card), i also trade at 50days timeframe a fair bit.  because of these characteristics, i shortlisted these:

• UOB one account (because no need to credit salary)
• DBS Multiplier (because buying of equities counted as investments)
• CIMB Fastsaver (because no extra effort needed)

Withdrawal ladder. To maintain the highest possible interest, need to carefully think how the tiered bonus interest will be affect! for my case, withdrawal order starting with first is : i) CIMB fast saver; UOB one and finally DBS mutliplier. 

Also the fall below threshold are $0 for CIMB fast saver, $500 for UOB one, $3000 for DBS Multiplier.

Unoptimised vs Optimised. Assuming interests & cash stays constant, my existing unoptimised combination of bank accounts (earning 0.3%, 0.05%, 1.5%), would earn $1.23K of interest this year; whereas with an optimised bank account (earning 2.2%, 2.44%, 1%) could earn up to $3.27K of interest. The difference is $2K!!! could have fund my taiwan trip(here) x2!

Conclusion

The greatest hassle encountered would be the need to effect changes for giro accounts, and also changing the salary crediting account with my work place. Noting that this is a one-time effort to gain an additional $2K a year without recurring efforts, motivated me a bit!

Hope you guys take some time to look into your savings account!