Savings account interest rates have taken a hit. How does this affect you?

The sudden slashing of interest rate by the US Federal Reserve has shrouded Singapore banks in financial distress. This unprecedented move by the US FED Reserve since the 2008 financial crisis pushed the banks to reciprocate by cutting its interest rates.

Many individuals and banks themselves are adversely affected by the slowdown in economic growth and a looming uncertainty in the financial world. There have been huge impacts on global demand and supply chains. 

As it is, many big-name banks have revised their interest rates, namely DBS, UOB, OCBC and Standard Chartered. UOB’s interest rate has reduced the most drastically amongst the four banks. What does this mean for all of us, including the individuals and businesses?

Major changes to savings account interest rates

The above example is using the base case of someone having a monthly salary credit of S$3,000 and a credit card spend of S$500. Depending on your financial situation and which savings account you use, the impact may be different. 

The adjustments in interest rate have seen nearly all banks slash their rates. The DBS Multiplier has had interest rates slashed from 1.85% to 1.6%, the UOB One Account has dropped a staggering 1% from 1.5% to 0.5%. The OCBC 360 has had a fall of 0.2% from 0.6% to 0.4% and SCB Bonus$aver has had their interest rate cut from 1.88% to 1.5%.

Significant revision in earnings for DBS, OCBC, UOB

DBS is expected to reduce its profits and dividends by 8%, taking the biggest hit among other banks. The same goes for OCBC and UOB too, their cuts amounting to around 4% and 5% respectively. Fitch Solutions has also predicted a loss in Singapore banks’ loan growth. This will be adjusted to 1.5% in 2020, a decrease from 3% last year.

With actions follow corresponding consequences as earnings and incomes of the individuals and banks dwindle. A cut in dividends means that ordinary shareholders would be at a risk of having their dividends reduced or completely axed out, depending on the severity of the reduction. 

Savings of the individuals will be reduced too. If you are a DBS Multiplier Account holder, you may no longer earn bonus interest on your dividends and the dividends will now be categorised as ‘income’  instead of ‘investment’.

How can you recover?

While the change is inevitable, you can fortify your finances using a few ways. One way is to invest in preferred dividends that are of fixed income. You can also diversify your portfolio by investing in bonds and defensive stocks to secure lower interest rates.

Alternatively, you can keep an eye at savings insurance plans that will provide you with a fixed interest per annum. This way, you will get a guaranteed return without having to worry about reduced savings. Read more at: https://www.policypal.com/endowment-insurance/plan

If you need more assistance with your financial planning and savings, you can reach out to us here: [email protected]. You can also WhatsApp us at +65 8750 0688 to arrange for a teleconsulting call to know more about what plan is the most suitable for you.

Schedule a Free Teleconsulting service with us today.

You can enjoy a free financial portfolio review. This review will help you better understand how to create a suitable financial plan for you and your family. We will analyse life insurance products from various insurers and present you with solutions, tailor-made to address your concerns. 

Our financial adviser representative, representing PolicyPal, will be happy to help you understand any of these insurance policies: 

  • Health Insurance
  • Critical Illness Insurance
  • Endowment/Savings Insurance 
  • Personal Accident Insurance
  • Term/Whole Life Insurance

To get in touch, you can WhatsApp us at 87500688 and let us know your preferred date and time for the appointment. Alternatively, leave your details below and we will contact you to help you arrange for an appointment. 

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If you would like to know more about a specific insurance product, you can also let us know your preferences. This is so that we can be better prepared during the appointment to present you with a comparison table if needed.

The teleconsultation can be done through a WhatsApp phone call or video call. However, we would recommend using Zoom as it is a free video-conferencing app that you can download for clear audio and video consulting on your computer or phone.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Read More:

Supporting Families and Wages: The Singapore Resilience Package 2020

Global Economic Impact of COVID-19

How is my Insurance Policies Impacted by the Coronavirus?

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