Another Personal Finance tutorial by GenX @ http://www.GenXGenYGenZ.com
This tutorial was first published in 2017 and updated on April 2019 with some minor revisions.
INTRODUCTION TO FIXED DEPOSIT OR TERM DEPOSIT
If you have been saving money by utilizing Savings Accounts that pay pathetic interest rates, e.g. 1% or less, you must be new to my blog and I welcome you to this tutorial.
Fixed Deposit (Term Deposit) is considered one of the safest investment tools offered by banks simply because your Principal Amount is guarantee and the interest rate is fixed for the entire tenure until maturity. Normally, longer tenure means higher interest rate. Having said this, you could even lose your money deposited in FD if the bank goes kaput or our nation goes bankrupt. Currency depreciation or hyper inflation is another story altogether.
Some may say that FD is not good as it can’t beat inflation, well, that may be or may not be the case. But I can tell you one thing, your money in FD is as good as cash (you can withdraw it at any time) compared to money invested into say a property which is not liquid. For example, if you are in the intensive care unit, your property (and even stocks/shares) worth millions of Ringgit may not be used to pay the hospital bills. So, one way to ensure that you have the funds to pay your hospital bills is to have Joint FDs with ALL (I kiasu mah) your loved ones.
For those of you who have medical insurance, I suggest you go check how many days your medical insurance is able to cover the cost if you are in the intensive care unit. For my case, my medical insurance only pays out RM100K per annum which is like equivalent to the cost of 10 days in the intensive care unit, and until age of 75 only!!!
Of course, if one is young and in the process of wealth accumulation, one should also consider higher risk investments like share market where we can earn much more OR lose everything. Same goes for property. You potentially make tons of money over time but not everyone makes money from investing in properties (except maybe for empty/vacant non-converted agricultural land (nominal land tax) where the price is sure to appreciate with time due to inflation).
And if you had bought Bitcoins prior to this year, you’ll be freaking rich if you were to sell them all today (Dec 2017). Too bad for me that I did not follow the super smart Ms. Suraya Zainudin (Malaysia’s Bitcoin Guru) in accumulating Bitcoins despite her sharing about it moons ago when it cost peanuts to acquire Bitcoins at her blog called Ringgit Oh Ringgit. My internet buddy Mr-Stingy, another top personal finance blogger, did purchase Bitcoin in September 2016 and since then has made more than 1000% profit!!! Click here to read Mr-Stingy’s article on Bitcoin where he explained Bitcoin in a way anyone can understand how it works. So, if I had followed these two Malaysia’s Top Bloggers in acquiring Bitcoins, I would be damn rich and globe trotting and not wasting my time stupidly writing this tutorial, hahaha.
The point is, I am not a financial consultant and I am not telling you how to invest your money but this article is purely to teach you a thing or two on how you can maximize your cash reserve by utilizing The Right Fixed Deposit.
First Lesson of the day – start earning more in interest (pocket money) with a mere RM500.
Every single time if you have more than RM500 in your savings account, which you won’t be utilizing it anytime soon to pay your bills, go open a Fixed Deposit or Term Deposit account and start earning 3% (or more) interest rate (in 2017).
Most banks in Malaysia allow you to open a 2 months tenure FD/TD with a mere RM500.
Example where you do not need RM10K to earn 4% above interest rate – HLB Online Pay Day Special FD, During 1st to 7th December 2017, with a mere RM1K you were entitled to 4.2% interest rate!!!
Lesson No.2 – how you earn interest from Fixed Deposit/Term Deposit.
When you are quoted an interest rate for a particular FD tenure, the interest rate is based on per annum.
For example, on 3rd January 2018 you deposit RM500 into a 3 months FD paying interest rate of 3%. Therefore, the maturity date is on 3rd April 2018 (total 90 days).
Interest earned = Principal Amount x Number of Days x Interest Rate Per Annum / 365 days.
Therefore, the interest you’ll earn is = RM500 x 90 days x 0.03 / 365 days = RM3.70
Note, if the maturity date falls on a Saturday or Sunday or even Public Holiday, banks like UOB and OCBC which adopt Statement based Fixed Deposit will automatically adjust the maturity to the next working day (in some instances, UOB may even adjust the maturity date to a day or two earlier so that it matures on a working day). For Certificate based Fixed Deposit, if the maturity date falls on a weekend or Public Holiday, the bank will pay you the extra few days interest when you uplift the FD on the next working day.
Lesson No.3 – deposit into FD which is insured by PIDM (google Perbadanan Insurans Deposit Malaysia to learn more).
Lesson No.4 – you can open as many Fixed Deposits as you want on the same day.
For example, if you have RM100K, you can split it to 10 Fixed Deposits with each amounting to RM10K with the same tenure (e.g. all 10 FDs will mature on the same date) or combinations of various tenures (1 month, 3 months, 6 months 12 months, etc). This may come in handy if say you suddenly need RM20K before the maturity date for an emergency situation.
Lesson No.5 – shop around for the best deal.
For standard board rates by banks with PIDM, Affin Bank offers the best interest rates. For example, as of October 2017, Affin Bank FD offers 3.8% for 12 months tenure versus HSBC 2.9% Term Deposit. So if you have RM10K deposited into Affin Bank FD, after a year you will earn RM380 versus HSBC TD RM290.
Lesson No.6 – is it better to pay of your housing loan or to deposit extra cash into FD?
Well, if you have extra cash already in FD in the event you are jobless for 6 months, and you have no clue as to what to invest in that guarantees you profit (or more importantly you can sleep soundly if the investment goes kaput), it makes sense that you go pay off your housing loan so that your net worth goes into positive territory ASAP and be debt free. Usually housing loan interest rates are higher compared to FD interest rates, so you will be saving money by paying off your housing debt instead of depositing into FD.
Lesson No.7 – For individuals, the interest earned from Fixed Deposits are tax free.
Unlike investing in properties where you have to pay taxes (assessments, land taxes and income tax from rental) plus hell of a lot of headaches from the tenants and cost associated with maintaining the properties; interest earned from Fixed Deposits are hassle free (more so now with Online Banking) and Income Tax free (for individuals but not for companies).
Lesson No.8 – Always open a Joint FD with your loved ones that you trust 101% (e.g. spouse or parents or children BUT never with GF/BF) where any party can sign (i.e. anyone of the signatories can withdraw the FD).
The reason is – in case of an emergency, your funds can be withdrawn. For example, if you are hospitalized, the other person still has access to your funds to pay your hospital bills. Worst scenario, the other person can withdraw the money in your FD to pay for your funeral expenses!!! No kidding. You’ll be shocked to know just how much a “nice” coffin will cost nowadays.
Lesson No.9 – You can split your funds into many Fixed Deposit Certs.
Fixed Deposit means that you have agreed to park your money with the bank for a certain period without withdrawing the funds. Nowadays, many banks will not pay any interest if you uplift (withdraw) your FD prior to the agreed maturity date.
Having said the above, some banks do allow you do make partial withdrawals without affecting the interest rate for remaining balance of the funds in a particular Fixed Deposit account/cert. Examples are CIMB Unfixed Fixed Deposit and also UOB.
Now, if you are unsure that you may have to uplift your FD before the maturity, you can always split the money you want to deposit into FD into many certs/accounts. For examples:
You have RM100K, you can deposit in 10 Fixed Deposit x RM10K. So in the event of an emergency, you can always uplift 1 or more of the RM10K Fixed Deposits.
You Have RM100K, you can place RM20K into 1 month FD (upon maturity if you do not need to utilize the funs you can change the tenure to 12 months), RM20K into 3 months FD, RM20K into 6 months FD and RM20K into 12 months FD.
For me previously, I like to have one FD cert maturing every month so that I always have access to my money in an event of an emergency.
FD BOARD RATES versus FD PROMOTIONS
If you walk into any bank, you will see a board (nowadays a screen/monitor) showing the interest rates offered by the bank for Fixed Deposit – this is why we call it Board Rates (I suppose). Or, if you visit any bank’s website, you will also see the same exact FD interest rates for the same tenures that are made known to the public at the bank branches.
Below are two examples of Board Rates updated April 2019:
From the above, it can be observed that no two banks’ FD Board Rates are the same. In this case, Affin Bank FD interest rates are much higher compared to HSBC.
Affiin Bank is offering 4.15% for 12 months tenure versus HSBC 3.15%. This means that Affin Bank’s 12 months FD interest rate is 31.7% higher than HSBC!!! So, it’s a no brainer that you should go with Affin Bank and earn 31.77% more in interest rate instead of opting for the lower rate with HSBC.
Having said the above, if you have RM10K to deposit into FD, you should go chase after Fixed Deposit Promotions. For example, as of April UOB is offering 4.2% for 12 months tenure.
Assuming you have RM100K, if you deposit into UOB FD Promo, you will earn RM4,200 after a year versus RM3,100 with HSBC 12 months TD at 3.15%. That’s additional RM1,050 FREE money!!
Another thing about Fixed Deposit Promotions is that you can deposit more than RM1M and you will still enjoy the Promo Interest Rate versus non Promo FD (i.e. Board Rates) where the interest rate will drop to a lower tier.
However, if you are not into chasing after FD Promos, well consider Affin Bank (your deposits are insured by PIDM) 12 months FD which pays the highest FD Board interest rates and have it auto renewed with the interest. There are finance institutions that pay higher dividends based on Islamic Principle Profit Sharing such as Bank Raykat or MBSB but your deposits with these said institutions are not insured by PIDM.
HOW TO CONTINUE ENJOYING PROMO FD WITH THE SAME BANK
For most banks, one of the most important condition to be eligible for their Promo FD interest rate is that you need to deposit fresh fund. This means that technically you are not eligible for Promo FD interest rate for FD maturing with the same bank (i.e. if you renew your matured FD, you will only be eligible for Board Rates).
So in order to make your matured FD fund be considered as fresh fund so that you are entitled to a new FD Promo on the very same day your FD matures, all you need to do are the followings:
- Go to the bank first thing in the morning on the day the FD matures.
- Transfer all the money of the uplifted FD to another bank Current Account via IBG (Interbank GIRO). Maximum amount RM1M over the counter at the banks.
- Write a cheque on the spot from the other bank (which you have just GIROed your money into) to place a new FD 🙂
Yes, above is all you need to do to recycle your funds to make it fresh again. I guess you can call it money laundering, hahaha.
Don’t understand? Well let me give you more details by giving you an example plus a brief tutorial on GIRO.
Say you have a FD with UOB that is maturing on Monday. And you would like to replace/renew your matured FD with UOB because they are offering the best FD Promo interest rates in town.
You have a Current Account with another bank, say Hong Leong Bank.
It is imperative that you go to UOB before 10am on Monday morning, always be kiasu and allow tolerance and don’t assume you will be served in less than an hour. The reason why you need to go to the bank first thing in the morning is to ensure that whatever funds you are transferring via GIRO (IBG) from your matured FD at UOB is credited into your Hong Leong Bank Current Account before 5pm.
So, from the above table, say you went to the bank at 10.30am and your Q number is called at 10.50am at UOB. By the time you fill in the necessary form(s) to instruct the teller to transfer the money via IBG into your Hong Leong Bank Current Account, it would be near to 11.55am. And by the time the teller gets the bank officer to approve your request/instruction of uplifting your FD and transferring the fund to Hong Leong Bank it would most probably be past 11am! That is why you should be kiasu and go to the bank before 10am to ensure that the IBG process is completed before 11am (receipt printed before 11am) and thus ensuring that the fund will be credited into your Hong Leong Bank Current Account on the same day before 5pm.
Once you get confirmation that the uplifted FD fund have been transferred before 11am to your HLB Current Account, i.e. you’ll get a receipt saying so; you can then safely write a cheque from your Hong Leong Bank Current Account to make a new FD Placement with UOB to enjoy their promo interest rate starting immediately 🙂
You see unlike IBG where the money will be debited instantly from UOB and credited into your HLB Current Account before 5pm, the cheque you wrote from HLB needs at least minimum 1 day to clear. This means you would have enough funds in your HLB Current Account on the day you wrote the cheque before it is cleared on the next day.
Now, if you refer to the GIRO Schedule above, it can be noted that if you perform an IBG transfer before 2pm, the funds will be credited into the other account before 8.20pm. But since I’m a kiasu person that plans for every worst scenario (shit happens – the cheque you wrote somehow is cleared after 5pm on the same day), I would not take the risk and would make sure that I complete the IBG application prior to 11am; therefore, ensuring that the fund transferred is credited into the Current Account which I wrote the cheque.
There is another option where you can also enjoy Special FD Interest Rates without even withdrawing your funds. Some banks (e.g. HLB, OCBC, and UOB) allow you to renew your existing FD without needing to transfer it out but the interest rate may be slightly lower than their FD Promo interest rate. On the other hand, some banks may require that you top up a minimum amount to your maturing FD and you’ll be eligible for a new FD Promo (e.g. Affin Bank). So make sure you ask if they have any “retention/rollover” FD promo.
And if you have a substantial amount of money in FDs maturing (say total RM300K consisting of several FD placements maturing on different dates in a particular month), talk to your Relationship Manager or the Branch Manager or the Service Manager several working days before the first FD matures and request that they seek HQ approval to renew all your maturing FDs on that particular month at a special interest rate equivalent to their Promo FD Interest Rate. Once again, it is imperative you talk to the bank manager several working days BEFORE your first FD matures because seeking approval from HQ takes time and don’t expect them to give you an immediate approval while you are at the bank. This paragraph applies to companies FD too.
Updated April 2019 – nowadays many banks (e.g. HLB and UOB) have Retention FD Promo Interest Rates where you can renew your maturing FD with promo interest rates that are higher than Board Rates. Also today (April 2019) we can perform Instant Transfer via online and the limit is RM50K per day.
I will now give you an example of depositing money into FD and the magic of compound interest. Say you deposit RM3600/year (=RM300/month) into FD every year where the interest rate is 3.8% p.a (as of October 2017, you can easily get 4.2% and above with 12 Months FD Promo).
At the end of the first 1 year you would have RM3600 x 1.038 = RM3,736.80
At the end of the second year you would have (RM3,600 + RM3,736.8) x 1.038 = RM7,615.90
At the end of the third year you would have (RM3,600 + RM7,600.92) x 1.038 = RM11,641.79
……….you continue to deposit RM3,600 yearly into FD with interest 3.8% and
At the end of the twentieth year you would have RM108,993.72!
Wow, with only equivalent of RM300 deposit a month into an interest bearing account at 3.8%, at the end of the 20th year you would have RM106,576.42!
Now, if you were to deposit RM12K every year (RM1K/month) into FD earning 5% p.a., the amount would balloon to RM416,631.02 and RM601,361.45 at the end of the 20th year and 25th year respectively.
Want to be a million ringgit-aire (millionaire if you got USD1M) in 20 years time? Let’s say the interest rate is 5% for FD, and to achieve RM1,000,000, all you have to do is deposit about RM30,000 yearly or RM2,500 monthly into FD. If the interest rate was to be higher, than you would need less amount or shorter duration to achieve the RM1M mark.
So once again, from the above, you can see that with just RM300 per month in savings you can have RM100K in twenty years time and the more you deposit, the faster you’ll be a million ringgit-aire. So are you willing to go buy the new iPhone or Samsung Note 8 with an installment plan and sacrifice being a rich man in 20 years time? It’s your choice and only you can choose, and come end of 20 years time don’t feel sorry for yourself but instead feel like a fool because you failed to save money.
The present interest rate for FD in Malaysia is around 3% for 12 months tenure (as of December 2017). You may get higher interest as banks are competing amongst themselves for funds from the public and have frequent FD promotions. Do check the FD rates from different banks to maximize your returns from FD especially if the amount is substantial like above RM50K where an extra 1% in interest earns you extra RM500/year.
Before you go invest in other riskier investment, ensure that you have adequate funds in fixed deposit or savings account for a few months to sustain your monthly expenses in the event of an emergency e.g. you are fired or you quit your job. Once that is achieved you may then go for riskier investments.
If you have a child, most probably you’ll have a Children/Junior/Kids Savings Account which pays interest close to 1 month FD Board Rate. Hong Leong Bank does offer Junior FD (with a mere deposit of RM1K) which pays interest monthly. But if you were to deposit your child’s money with Affin Bank FD, your child would be earning more in interest.
And if your child has more than RM10K, you should be chasing after FD Promos too, hahaha. Hong Leong Bank once a while does offer very good Children FD Promos, so be on the look out for them.
UOB, on the other hand, does not encourage children Fixed Deposit accounts. When I wanted to open Joint FD accounts for my children many years ago where 3 of them were under 18, my UOB Relationship Manager had to seek approval from HQ. FYI, the child’s name will not appear in the Joint Children FD Account statement. Basically, my wife and I will be their trustees and UOB being a kiasu Singapore bank has tons of forms to sign when opening a Child FD account. Once the Joint Accounts with my children were opened, they are entitled to UOB’s FD Promos which offer better interest rates compared to Board Rates. When any of my child reach the age of 18 years old, I will insist that my child’s name be reassigned as the first name in the Joint Account and he/she is added as a signatory (any one can sign) and they can then withdraw their money anytime without my consent by simply presenting their NRIC (it’s their money after all from their Ang Pows). On the other hand, I also can withdraw their money, hahaha.
PROS AND CONS OF CERTIFICATE AND STATEMENT BASED FIXED DEPOSITS
Certificate Type Fixed Deposit
Previously, most banks only offer Certificate type fixed deposit. You will be issued a certificate upon placement of a FD. And in order to uplift/withdraw the FD, you need to present the certificate at the branch where you placed the FD with. Unless you have given prior instructions (e.g. upon maturity to credit the money into your Savings Account) on the day you place the FD, you need the cert to withdraw the funds.
And if for whatever reasons you are not able to produce the FD certificate when you want to withdraw your money, you may need to indemnify the bank and even produce a Statutory Declaration witnessed by a Commissioner of Oaths. And if the FD was in a joint account, before you can withdraw your money, the bank may require that all signatories of the FD (if both/all signatories are required to uplift the FD) sign on the relevant documents to declare that the original FD cert was lost.
So the Pro of a Certificate Fixed Deposit is that it is not easy for the non-holder of the FD cert to withdraw the money in the joint account if he/she is unable to produce the FD certificate. I said not easy but not entirely impossible also – i.e. one would need to do a false declaration.
The Cons of having FD certs, especially if you have many of them is that you have to keep track of the maturity dates. The old timers will have a log book for this and the younger ones will have the info stored in their PC or smartphone where we can set an alarm to notify them when the FD is due.
The banks that still practice Certificate based Fixed Deposit that I know off are Alliance Bank, Hong Leong Bank and Maybank.
Statement Based Fixed Deposit
Firstly, the thing you must know is that the piece of paper that was given to you on the day you place a Statement Based Fixed Deposit is useless and you can throw it into the rubbish bin without any worries. You do not need that useless piece of paper to withdraw your money unlike FD Certificate where you need to produce it. This is the most important con of Statement Based FD especially for joint accounts. I will touch on it very soon.
The benefit of having Statement Based Fixed/Term Deposit Account is that you will get monthly statements from the bank which will summarize all your FD placements. This can be a pro or a con. The pro side is that you can easily keep track of all your FDs in that particular bank.
The other plus point of a Statement Based FD is that you do not need to bring any cert(s) to the bank when you want to uplift/withdraw your FD. All you need is your NRIC and the bank will verify it with biometric ID, i.e. thumb print.
Now, the above pros can also be easily turned into cons.
Con No.1 – if someone opens the envelope containing your info related to your FD placements, they will know exactly how much money you have in that bank and what day you may go to the bank to perform a withdrawal. If your wife/girlfriend/mistress/children/brother/sister/father/mother/MIL opens your letter without your consent, you then can no longer hide from them how much money you have stashed away for a rainy day, hahaha. But worst still, what if the letter falls into the wrong hands. It is not uncommon for me to get other people’s letters in my mail box!
Having said the above, nowadays banks no longer issue paper statement but e-Statements. Now we have to remember all our banks’ passwords on top of other many other passwords (emails and online shopping sites)!!! And if we do not log in after 6 months, the account may be suspended!!! I hate internet banking!!!
UOB does sent me an official letter whenever I uplift/withdraw any FD.
Con No.2 – for joint account where any one can sign, any of the signatory can withdraw the money anytime without the other signatory’s knowledge. Unlike Cert type FD, the one holding the cert has some “control” over when the FD is uplifted/withdrawn.
If you are still blur about what I mentioned above, let me share with you what I told my son couple years ago when we went to UOB Bank (which practice Statement Based FD) to open another new Joint FD with him and my wife.
FYI, I have one Joint FD Account (my wife, son and I) where my name is “first” and another Joint FD Account (also with my wife, son and I) where my son’s name is “first” where any of the FDs in both the accounts can be uplifted by either my wife or my son or myself. This is so that I know which FD belongs to who. If the FD has my son’s name showing as “first”, it means that FD belongs to him.
What I told my son on pro of Statement Based FD – if anything happens to me, fly back immediately to KL, first thing upon landing is go to UOB and OCBC and not go see my liveless body. Upon reaching the bank(s), you just have to present your NRIC and withdraw all monies that are in accounts that have my name. So that you can then pay for the cost where my ‘vegetated’ body lay in the intensive care unit or for my funeral expenses, hahaha.
What I told my son about the con of Statement Based FD – you or mummy can withdraw/uplift a joint FD without me knowing. Actually, you can even withdraw/uplift all the FDs from all the joint accounts which have your name. You can even quietly go to the bank and withdraw/uplift on the same day that I placed a new FD in the account joint with you.
Once again, for Statement Based FD, all you need is your NRIC to withdraw/uplift any FD. Like I said, the piece of paper that OCBC and UOB give you the day you place a FD is useless.
So for you people who have FDs for your retirement expenses with banks that practice Statement Based FD, please take note and be warned – You better trust the person 101% if the joint account is ‘either one to sign’.
In my case, all my FDs are either joint with my wife and/or children where anyone can sign. Of course I trust them fully. What is critical and most important, I cannot piss off my wife or else she will go withdraw all my money without my knowledge or consent and leave me penniless!!! And it can get worst where I could end up with more than a couple hundred thousand Ringgit worth of debt if my wife ever max out her credit limit assigned by me for her supplementary credit cards. That is why I am an extremely good husband who obeys my wife and burns away some of my money to buy her handbags occasionally so that she continuously loves me and doesn’t have the urge to go withdraw my money without my consent to buy herself handbags, hahaha. So guys, if you ever piss off your wife big time, to be on the safe side, first thing to do is call your credit card customer service and ask them to temporary suspend your wife’s credit cards, hahahaha. As for the ladies, you now know what to do to get revenge on your naughty husband, hahaha
You know what, by highlighting the above, I might have just taught someone to “con” another person off his/her money! Like I said, what if your wife/girlfriend/mistress/children/father/mother ever opens your letter and see how much money you have, what’s going to stop them from withdrawing your money from the joint account and go burn it on temporary happiness? Hahahahahahaha.
PROS AND CONS OF eFD (ONLINE BANKING)
It is a fact that Online Banking makes it very convenient for us to perform our banking transactions.
However, there are security concerns – your account being hacked or you fall into a phishing scam. Well, shit happens and it is best to be kiasu and plan for the worst case. Therefore, if you have substantial amount to place in FD, I would recommend that you personally go to the bank and place your FD instead of opting for eFD. For my case, I would only deposit funds allocated to pay my credit card bills in short term eFD at Board Rates (e.g; 1 month or 2 months). For 3 months and above, there are many FD Promos offering better interest rates compared to board rates.
In addition to the above security risk, there is one major set-back with eFD:
Firstly, not all banks allow us to open Joint eFD where “any party can sign”. Therefore in the event of an emergency, your loved ones would not have access to your funds (i.e. they can’t transfer the money in your Online Account to theirs).
Say for example, you are paralyzed and your spouse/child needs to withdraw money from your FD to pay for an operation. However, you have deposited all your money into eFD because you were too lazy to go to the bank and deposit the money into a Joint FD with the condition “any one can sign”. Therefore, your spouse/child has no access to your account because you were so secretive that you did not disclose your USERNAME and PASSWORD to them.
Now, assuming that you did give them the USERNAME and PASSWORD (which I doubt); as you are fully aware, in order to transfer funds, most of the time we need a One Time Password which is sent via SMS to our mobile phone.
However, since your phone is locked or maybe battery kaput, you loved one can’t receive the OTP. Then again this can be resolved by simply taking the sim card out and installing it into their phone, hahahaha. They still need to know the Sim Card Password to activate the sim card; but this can also be easily resolved by calling the Telco to request for the PUK Code by pretending to be the owner of the Sim Card by answering some simple questions for verification.
Worst scenario, your loved ones can’t locate your phone, i.e. sim card, for whatever reasons, this one is kind of hard to resolve and this means your loved ones can’t access to your Online Banking Account without the OTP.
Now, even if your loved one has access to your Online Banking Account, there is a limit as to how much they can transfer out daily. If you have a Joint Account with a physical bank, your loved one can simply walk into the bank and withdraw from the Joint FD Account which amounts to RM1,000,000 by requesting for a banker’s cheque or even pure cash or GIRO to their account without any problems.
The point of the above paragraphs are to show you that in an emergency, most probably your loved ones will not have access to your eFDs (and that’s assuming you have informed them you have eFDs with this and that Online Banking Accounts; because there are no paper trails). So make life simple for your loved ones and maybe even save your own life, by opening Joint FDs with your parents/children at the banks (yes at different banks and more so with Statement Based FD where they can simply withdraw the funds using their NRIC) so that your loved ones will have immediate funds in the event of an unforeseen circumstance.
If you ask me, I would advise that you open Fixed Deposit Accounts (must be Statement Based so anyone can withdraw simply by presenting their NRIC) with adequate amount, say for worst scenario at least enough to pay for your funeral expenses. And I suggest the following FD accounts for emergency purposes where anyone can sign to uplift the Fixed Deposits.
- Joint FD with Spouse.
- Joint FD with Spouse and Child. (1) if your child is under 18, you and your spouse are basically trustees, i.e. it’s your child’s money. (2) If your child is above 18, he can withdraw the FD anytime (if the condition is anyone can sign).
- Joint FD with Parent.
- Non Joint eFD – your own pocket money to pay for any bills in the future that are top secret only known to yourself, hahaha.
Lately, there were rumours circulating that the government may reimposed inheritance tax. Luckily the government did not to so in the recent budget. If they did, your stocks, shares, properties and even FDs inherited by your loved ones will be taxed. Say for example, your child inherited your bungalow worth RM3.3 million and the inheritance tax rate is 30%. How is your child going to come out with RM1M to pay the tax? Same thing applies to your shares holding in a particular company which has lots of non-liquid assets worth millions. Well, if the government does ever reimpose inheritance tax, sell of part of your non-liquid assets and convert it to cash while you are still alive and deposit the money into Joint FD with your child and make sure that your child’s name is the First Name so that he/she can claim that the money is his/hers (given to him/her out of love while you were still alive) and hopefully not subjected to any inheritance tax, hahaha. With the money in FD, your child would then have the cash to pay the inheritance tax for your non-liquid assets 🙂 Or better still, sell of all your assets and burn most of your money on yourself while you still can, because someone else would when you are 6ft under without saying thank you to you, hahahaha. Of course you are expected to leave some money to your loved ones (by having Joint FDs with all them so there’s no quarrel as to who gets what), else it may be deemed irresponsible of you not ensuring that your loved ones have a pretty comfortable life; and more importantly enough to pay for your funeral expenses.
If you are new to the work force and just starting your career, below are the Top Best of the Best Independent Unbiased Personal Finance bloggers in Malaysia (as far as I am concerned) who willingly share with you for FREE on matters relating to wealth accumulation and retirement too. Check them out, you are sure to learn a thing or two which will benefit you immediately or in the future.
Mr-Stingy.com – he’s my internet buddy and a really good writer where his contents are straight to the point (unlike me where I will spoon feed you with so much details so that you can comprehend what the heck I’m trying to tell you, hahaha).
RinggitOhRinggit.com – not only is she gorgeous but writes fantastic informative finance related articles that are second to none (except maybe for credit cards where she recommended my blog, hahaha).
DividendMagic.com.my – want to learn about playing the stock market and retire comfortably? Check out this website where the author not only writes about stocks but have articles on personal finance too to assist you to save/earn money.
KLSE Malaysia/ck5354.blogspot.com – this is another superb blogger that has been assisting many on matters relating to personal finance matters since 2008!!!
NEW Articles For 2018
I can tell you this, if you think that the standard of living has deteriorated after the Government implemented the 6% GST, wait till we are in a recession and then only you will know what it means to have no money for food.
If you have yet to achieve the target to have 6 months cash reserve in the event of an unforeseen circumstances, it is best that you click here and read my article Prepare For Tomorrow So That You Can Sleep Soundly. In this said article, I once again shared with you the secret to being rich. It has nothing to do with how much you earn but rather are you able to save and not paying a sen in interest to the banks.
Another Personal Financial Tutorial by GenX