How to put your salary increment to good use

Despite the slight uncertainty in the economy and job market due to geopolitical issues, employees in Singapore are still in a favourable position to gain at least a four per cent salary increment in 2024.

A recent study by the Singapore Business Federation's (SBF) on Manpower and Wages has also found that as many as 64 per cent of small and medium enterprises (SMEs) and large companies across all major industries have planned to increase wages by an average increment of six per cent, which way to get around the rising inflation which is trending at four per cent for the whole of 2023.

That said, how will you make the most of your next salary increment or pay raise if you receive one?

What to do with your pay raise or salary increment - spend, invest or save?

Most people may choose between investing it to protect the value of their money, saving it for rainy days or spending it to pamper oneself. Whichever you choose to do, here are some recommendations that may help you optimise every dollar you receive.

Grow your wealth by investing

Assuming you earn S$5,000 a month, a four per cent increment would mean that you'll have an additional S$200 every month. How can you start to invest with just a few hundred dollars of salary increment? You may not be able to buy a bunch of blue-chip stocks but you can invest small amounts consistently to accumulate a portfolio over time.

Start by looking for an online broker like moomoo or robo advisor such as Endowus that allow you to invest in ETFs or index funds for S$200 or less every month. These investment products are great for portfolio diversification, hence reducing your investment risk.

Alternatively, consider investing in conservative options like T-bills or bonds that require as little S$500 to start. When you buy bonds or T-bills with AAA credit rating, they are almost capital guaranteed and interests are also fixed as long as you wait for it to reach maturity.

Optimise your savings with high interest accounts

There are many savings accounts in Singapore that offer more than the measly 0.05 per cent interest rate per annum (p.a.). Let's take the OCBC 360 Account as an example, it allows customers to earn as much as 7.65 per cent p.a.

If you choose to deposit your salary increment or pay raise of S$500 per month into this Singapore account, you can earn an extra 1.20 per cent on your first S$75,000 savings as Step-Up Bonus. You may also receive another two per cent interest if you credit at least S$2,000 monthly salary to the account via GIRO.

Another way to earn more with your savings is to tap on fixed deposit accounts that offer the best interest rates. The commitment starts from as little as S$1,000 minimum deposit and the lock-in period can be as short as six months. These accounts are ideal for portfolio diversification because they are risk-free and require minimum effort to manage.

Here are some of the best fixed deposit accounts in Singapore that we have shortlisted:

Bank	Interest Rate (p.a)	Tenure	Minimum Deposit
CIMB	3.55per cent	6 months	S$10,000
Hong Leong Finance	3.30per cent	6 months	S$500,000
ICBC SGD Step-Up	3.35per cent	3 months	S$500
OCBC	3.10per cent	6 months	S$30,000
Standard Chartered	3.10per cent	6 months	S$25,000
UOB	3.10per cent	10 months	S$10,000

Make informed choices when you spend

There is nothing wrong with pampering yourself when you receive a salary increment or pay raise. After all, spending is good for the economy. However, researching your options and creating a budget is a must to avoid impulse buy and going beyond your means. The last thing you want is to spend beyond your increment and end up in debt.

If you are a savvy shopper, you must have realised that using the right credit card while you shop is the best way to make the most of your hard-earned money. Using the right card can let you save more and earn more rewards along the way.

Not sure which card offers the best deal for your next purchase? Here are some credits cards with the best rewards for different shopping categories:

Conclusion

Even though Singapore's economic outlook for 2024 is unclear at the moment, the prospect for salary increment is looking promising. If you do receive your well-deserved salary increment or pay raise in the near future, be sure to invest, save or spend the extra amount wisely and with clear financial goals in mind.

ALSO READ: Salary increments and pay raises in Singapore: How much to expect in 2024 and the near future

This article was first published in ValueChampion.