What came to your mind first? Fixed deposit? You are not alone!
I am not sure how many of you still believe in FDs. Current FD interest rate is about 0.8% for 12mths tenure, if you put less than $10,000. One year later, you get $80 interest or less. You might do better putting your money in a normal savings account that offers bonus interest rates for salary crediting, spend on credit card, investment with the bank bla bla bla.
Many banks offer such savings account but some of us may find it a hassle to fulfil those bonus-interest requirements, e.g. your employee still issues cheque for salary! Haha! Or your savings in that account exceed the maximum limit for bonus interest. So what can you do?
Singapore Savings Bond!! Bond is a form of instrument to raise money. In return, bond holders get paid fixed interest periodically; and when the bond matures, like FDs, the bond holders usually get back the principal sum.
Why should you get interested in Singapore Savings Bond? SSB is fully backed by the Singapore Government, meaning you will get back your investment amount in full (unless something really bad happens?). Interest rate is typically higher than FD. For e.g. Feb18 bond stands at 1.55% interest for the first year which is not bad right? What’s more? The minimum investment amount is only $500 unlike FD which require at least $5000 yet offer a lower interest rate.
Still having reservations? The interest rate increase every year you continue to put your money in it. Taking Feb18 bond for example again. The interest rate is 1.59% for the second year...1.91% for the fifth year...and steadily increases to 2.75% for the tenth and final year! This mechanism encourage individual to save for long term. Ok, I heard you! Ten years seems very long, what if I need the money? Not to worry, coz flexibility is yet another advantage of SSBs. You can choose to redeem the bond anytime and get back the full amount within one month. And since the interest is only paid half-yearly, whatever interest will be pro-rated and paid to you. Very different from FDs whereby you lose all interest earned if you withdraw before maturity date.
To me, it’s a good way to start investment if you hadn’t, especially if you are afraid of the risks in buying shares and what not. I even have a friend who buys SSB only and doesn’t look at shares although the returns are generally more rewarding.
For more info, you can visit http://www.sgs.gov.sg/savingsbonds/Your-SSB/This-months-bond.aspx. There is even an Interest Calaculator for you to work out how much interest you willl be getting over ten years :D
Disclaimer: these are my personal opinion only. Please seek professional advice if necessary.
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