Chinese New Year is here once again, so it’s time to collect angbaos for some bonus income.
Instead of splurging all of it in ways that you might end up regretting down the road, why not put this money to good use?
Here are 5 ways to use your angbao money wisely.
1: Invest
This should come as no surprise, given that investing is the best way to grow your wealth in the long run.
Investing in equities builds wealth through the magic of compounding, helping your money to multiply over the years.
My preferred investing strategy is index investing, where you invest in a broad ETF that tracks a well-known index like the S&P 500.
You can check out my other posts on investing here.
2: Save
Investing is great for building up wealth for your future, but you need cash to tide you through the present and the near future.
Saving money in a high interest savings account is another way to make your money work for you while still leaving it liquid and ready to use for your immediate expenses.
Given the high interest environment we are in, it’s a good opportunity to take advantage of these high interest rates while they’re around.
Check out this post to find my choice of savings account for adults and students.
3: Top Up CPF/SRS
Besides putting your money in a bank account, you can also choose to top up your Central Provident Fund (CPF) and/or Supplementary Retirement Scheme (SRS) accounts.
Money in your CPF enjoys an attractive interest rate of 2.5% (Ordinary Account) – 4% (Special & MediSave Accounts), which isn’t too bad compared to the interest rates offered by savings accounts now.
The main reason for choosing this option is to enjoy income tax benefits as your taxable income will be reduced, which can help you to save on the final tax payable.
At the same time, the money in your CPF accounts will accrue interest at generous rates.
The big drawback is that money you put in will essentially be locked up until you’re able to withdraw money from these accounts, which can be a number of years or even decades depending on your current age.
So, before you decide to top up your CPF/SRS accounts, make sure you only deposit money that you don’t plan on using.
4: Donate
Another good use of your money is to donate it to support a cause that you believe in.
There are many communities that are less fortunate than ourselves, and a donation of any amount can go a long way in helping the members of these communities.
As a bonus for this act of kindness, donations are also tax deductible.
If you’d like to donate, make sure you do so through official platforms like Community Chest or Giving.sg to ensure the legitimacy of the organisations you are supporting.
5: Spend
Finally, as important as all the earlier points may be, don’t forget to spend a portion of it.
Personally, I believe that we should always spend some of our “bonus monies” in any way we like.
I think this helps to make the journey towards saving and investing more tolerable and also reminds us that while planning for the future is important, so is living in the present.
I usually set aside 30% – 50% of such money to spend on myself and my loved ones.