How to Use 2 Bank Accounts to Take Control of Your Money
“Do you save first, or spend first?”
Young working adults often get asked this simple question about their cash flow. Most admit that they save whatever’s left after spending. The problem? There’s usually very little left.
That’s when this simple yet powerful method comes into play: the 2-Bank Account System with the 20-40-40 Approach. ^ It helps you pay yourself first and build a sustainable money plan without feeling deprived.
^ This method is based on the author’s own concept and experience and has no reference to any official guideline or endorsed by any authority
Step 1: The First 20% (CPF Contributions)
Before your salary even reaches your bank, 20% goes straight into your CPF account. Add your employer’s 17% contribution, and a total of 37% of your income is channelled into your CPF Ordinary, Special, and Medisave Accounts. 1
While CPF-OA can be used for housing, don’t forget: CPF savings are meant to fund your future retirement needs. Use them wisely so that your CPF balances continue to grow towards the required minimum sum at age 55.
Step 2: Bank Account #1 – Daily Living (40%)
After CPF deductions, your salary is credited into Bank Account #1. From here:
- Set up an auto-transfer of 40% into Bank Account #2 (your “Pay Yourself First” account).
- The remaining 40% stays here to cover your monthly expenses.
💡 Pro tip: Track your spending by splitting them into Necessities (e.g., rent, food, transport) and Treats (e.g., shopping, Starbucks). What feels like a “need” to one person may be a “treat” to another — it’s about balance, not deprivation.
Step 3: Bank Account #2 – Pay Yourself First (40%)
This account builds your financial foundation. According to the Basic Financial Planning Guide 2, the remaining 40% can be allocated into three key areas:
a) Emergency Fund (10%)
- Aim for 3–6 months of income, depending on job stability.
- Only for genuine emergencies: medical bills, job loss, or sudden expenses.
- Once fully funded, you can redirect this 10% to support parents or boost savings/investments.
b) Insurance Protection (15%)
Life is unpredictable. The right coverage ensures your plan remains on track when setback occur:
- Medical Plan (H&S): Covers hospital bills for life, subject to policy terms and conditions.
- Long-Term Care Insurance: May support costs of severe disability or ongoing care.
- Accident Plan: Provides protection against accident-related injuries, disabilities, or death.
- Critical Illness Plan: May provide financial support for treatment and recovery.
- Loss of Income Insurance: Provides monthly payout if you can’t work due to accident or illness.
c) Savings & Investments (15%) *
- Start early — even small amounts can grow over time thanks to compounding.
- Consider factors like risk, returns, liquidity, and time horizon.
- Stay disciplined — investing is a long game, not a quick win.
- Work with a trusted advisor who can help you build a portfolio that balances security and growth.
* This is dependent on individual’s risk appetite and will be determined through fact-find and needs analysis
Why This Works
The beauty of the 2-Bank Account System with the 20-40-40 Approach is that it:
✅ Forces you to save first, spend second.
✅ Builds in protection (insurance) so setbacks don’t derail your goals.
✅ Balances short-term lifestyle needs with long-term financial security.
It’s a simple framework, but one that can change the way you manage money — today, and for the rest of your life.
Sources
1 https://www.cpf.gov.sg/employer/employer-obligations/how-much-cpf-contributions-to-pay
2 https://www.moneysense.gov.sg/planning-your-finances-well/