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5 smart ways to use your year-end bonus

Put the money from your 13th month bonus in Medisave and other sound investment vehicles.

Invest your year end bonus money

PHOTOGRAPH: 123rf.com

It’s our favourite time of the year! No, not Christmas – we’re talking about bonus season. Most companies in Singapore dole out at least the 13th month bonus at this time. Some lucky souls may even receive a performance bonus (though some companies do a separate payout at a different time). All these add up to a healthy bounty that’s pretty darn tempting to spend, spend, spend. But don’t be tempted! Instead, check out our tips for investing your hard-earned money wisely.

 

Idea #1 Settle your debts or purchase your foreseeable big-ticket purchases

First things first: clear your debts, if any, so you don’t continue to incur interest expenses. If you know you have to purchase a big-ticket item soon, such as changing your family car or renovating a leaky toilet, do it soon, and quickly.

When our pockets are deeper, we tend to splurge more on little items here and there without thinking about it, but all these little expenses add up. By focusing on buying your big-ticket items, you are reserving your resources to solve your top-priority needs.

If you have recurrent bills or are paying anything by instalment, consider paying up the full sum. This puts your bonus to good use and you won’t have to sweat it out over the next few months or years, supporting those installments.

 

Read more: Easy ways to get out of credit card debt

 

Besides saving on interest (if any), you may even get a discount. For example, if your child attends Chinese enrichment lessons at Berries World, you get a $50 discount if you pay up for the whole year at one go.   

 

Idea #2 Put your bonus in a fixed deposit account

This is the most simple and straightforward way to save, other than putting it in a regular savings account. Out of sight, out of mind; hopefully, without seeing all those extra zeroes in your regular bank account, you won’t be tempted to spend.

Locking your bonus away in a fixed deposit account offers a two-pronged solution. Firstly, you can’t touch it for a certain period (tenure starts from as short as one month, but we’d recommend you squirrel your money away for at least six to 12 months, so you enjoy a higher interest rate.)

Secondly, fixed deposit accounts pay you more interest than the paltry amount your regular savings accounts give you, which can go as low as 0.05 per cent. Depending on the amount you’re depositing, annual interest rates for fixed deposit accounts can range from 0.08 per cent at Citibank, to 0.35 per cent at CIMB. Rates change all the time, so do run a quick Google search on ‘Fixed Deposit Accounts Comparison Singapore’ to suss out the best deals.

 

Idea #3 Take up a term insurance plan  

All major insurance companies offer term insurance plans that allow you to save up over say, 18 or 21 years, and collect a fat payout at the end of it. Some plans will give you the option of collecting a small cheque annually, or you can choose to reinvest the dividends to let the interest compound.

Tip: Arrange to pay your premium annually, right after collecting your bonus. Eight years ago, I signed up for NTUC Income’s Revosave plan. I chose to pay my premium in January, right after my year-end bonus comes in, so I won’t be tempted to overspend for Chinese New Year (typically in late January or early February).

 

Read more: 5 things you need to know about endowment plans in Singapore

 

The plan comes with guaranteed cash benefits. From the third year onwards, I received a guaranteed yearly cash benefit equivalent to 5 per cent of the sum assured which I chose to redeposit and accumulate with NTUC because it paid me an interest rate of 3.5 per cent. That’s 10 times more than what fixed deposit accounts give me!

Being a conservative investor, I prefer to buy such insurance plans rather than shares or stocks, as my insurance plan also came with a capital guaranteed promise. I may not make a lot of money but at least I won’t lose any either.  

If you’d like some health insurance coverage as well, these policies usually come with some (though not much) coverage that can supplement your existing policies.  

 

Idea #4 Buy gold

The beauty of investing in gold is, well, its beauty. If your husband complains that you’re buying pretty trinkets, you can always explain that everyone knows gold makes a solid investment. Of course, you’ll end up spending money on workmanship which, when you sell your gold, cannot be recovered.

If the gold price is low, it’s worth investing more in this precious metal as gold will always hold its worth, even though its price may fluctuate.

Another way is to invest in gold bars or gold coins. You can choose to buy as little as 1g coins, or even in 1kg bars. Local company Pure Gold sells gold and silver in beautiful, collectible designs, such as Panda coins, a wedding rose collection, or even a Biblical gold collection. You can check them out at www.puregold.com.sg.

You can buy gold bars at regular goldsmith shops too. Here’s an insider tip. Pop by pawn shops; you can pick up bargains sometimes as prices can go slightly cheaper than what ‘brand new’ gold bars cost.

Also, check out Mustafa’s glitzy gold section. The gold price changes regularly (and very quickly). We were super chuffed when, while paying for our gold bar, we noticed that the price had jumped a little in the previous minute, giving us a (tiny) profit!

 

Idea #5 Top up your Medisave (and also your loved ones’)

Invest your bonus in your (future) healthcare needs, especially if you anticipate that you or your family members will need to tap on your Medisave account soon or regularly. There are many benefits to doing so.

 

Read more: The health insurance policies you need at every age

Firstly, the Central Provident Fund (CPF) gives you 4 per cent annual interest on your Medisave account. That’s more than any Fixed Deposit account in town.

Secondly, if you are a self-employed person who does not pay CPF monthly, you have to make a voluntary cash contribution to your Medisave account, as calculated by CPF. (You will receive a letter from CPF instructing you of the amount to top up.) The good news is any contribution will qualify you for a tax relief. If you have an especially big bonus, consider putting in more than you require. The extra can be used to offset next year’s required cash contribution. 

You can also do a voluntary cash top-up for your family members’ Medisave accounts. By squirrelling away your money in Medisave during good times, you will be assured that, should a medical crisis hit, you can use your Medisave to help pay for your next bill instead of shelling out more cold, hard cash. Sometimes, the greatest bonus is not the cash component, but the peace of mind you enjoy knowing that you have put aside your money for a rainy day.  

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