You will be able to pick a place for your emergency fund where you can get the money quickly and it keeps its value.
Find the account that holds your emergency fund today, or the one you were planning to use for it, and note the bank and the account name before you read further. Each part below gives you something to check about it.
An emergency fund tends to be needed when things have already gone wrong: a retrenchment letter arrives, someone is admitted to hospital, or the pipe in the flat upstairs bursts. At that point there are three things you do not want to learn. One is that the money will take two weeks to reach you. Another is that it is now worth less than the amount you put in. The third is that half of it went last month and you didn't notice. All three depend on where the fund is kept.
Think of an emergency fund as having two jobs, and both have to hold up on the worst day you can picture.
The first job is access. You should be able to get the money within days. A hospital stay may need a deposit straight away, and some repairs can't wait. Losing a job usually gives you slightly more room, but not months.
The second job is holding its value. In lesson 3.1 you worked out a target, the amount you expect to need. That target only works if the fund is still that size when you draw on it. A fund that can drop by a fifth in a market fall leaves you short of it, and markets often fall in the same period that people are losing jobs.
Interest sits in third place. A higher rate is welcome as long as it doesn't weaken access or value.
From these you get a test to run on any account, checked in this order: how quickly the money can be withdrawn (it has to be within days), whether the value can go down (it must not), whether SDIC insures it and your total at that member stays inside the limit, and finally interest, which you use only to decide between accounts that have passed everything else.
Both savings accounts and short-term fixed deposits meet the two jobs, so either can hold an emergency fund. With a savings account the money reaches you the same day. A fixed deposit normally earns a higher rate, in return for keeping the money in place until an agreed date. Take it out before then and you will typically give up some or all of the interest. A common arrangement is to hold one month in a savings account and put the remainder in a short fixed deposit, accepting a slightly longer wait on that part for the extra interest.
The Singapore Deposit Insurance Corporation (SDIC) insures Singapore dollar deposits held at banks and finance companies that belong to the Deposit Insurance Scheme. Cover is capped at a limit per depositor at each member, and the scheme decides what that limit is. Should a member bank fail, insured deposits would be repaid up to the limit.
On sdic.org.sg, look for three things. The site lists member banks and finance companies, so confirm yours appears there. Next, read the current limit on the site. The limit has been changed in the past, so a figure someone mentioned to you may be out of date. Then check which deposits count. Singapore dollar savings accounts and fixed deposits are covered. Foreign currency deposits, structured deposits and investment products sit outside the scheme, including ones a bank sells you.
The limit counts everything you hold at one member, across however many accounts you have there. If your emergency fund shares a bank with your other savings, add the balances before comparing. Darren (an invented example, with made-up figures) has a S$13,150 emergency fund and S$20,000 in other savings at the same bank. S$13,150 + S$20,000 = S$33,150, and that S$33,150 is set against a single SDIC limit. If Darren's total at one member ever rises past the limit, the part above it is uninsured. Moving some of the money to a different member bank solves this.
Hold the fund in an account of its own, away from the one you pay for things from. When the two are mixed, your balance looks healthy, and a flight sale or a new phone becomes an easy yes. Over a few months the fund gets smaller even though nobody chose to spend it.
An account of its own, preferably without a card linked to it, means one extra step before the money can be spent. That small step is usually enough to prevent spending by accident, while you can still get at the money when an emergency comes. Many people also open the account at a different bank from their everyday one for the same reason, which works as long as moving money between the two banks is quick.
Several places can feel like savings yet fail one of the two jobs:
Investments, including shares, funds, ETFs and robo-advisor portfolios, can lose value at the worst moment, and selling them takes a few working days. Cash management products put your money into money market funds. An app may display them much like a savings account, but they are not deposits, and SDIC doesn't cover them. CPF can't be drawn on for emergencies. Most of it stays locked until set ages and for set uses, as module 5 explains. Long savings plans and endowment policies tie money up for years, and surrendering one early usually gives back less than you paid in.
Owning any of these is fine. They just don't suit money you might need next week.
You now have a short test for any account: how fast you can get the money out, whether its value can fall, and whether SDIC covers it within the limit, with interest as the tiebreaker after those. Open the product pages for the accounts you are considering, or the account you already use, and find those details for each.
Choose the account for your emergency fund and write down how quickly you can withdraw, what interest it pays and whether SDIC covers it.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).