Last year, after not bothering with efficiently managing my liquid money for a long while, I decided to take a look at what are some of the short term saving deposits available to us.
So my setup for last year was a mixture of:
- OCBC 360 Hurdle Account
- UOB One Hurdle Account
- Singapore Savings Bonds
- Lion Global Money Market
One year has passed and there are some changes. However, most of the plans available to you are still out there. But some of the plans on floating interest rates might start to look attractive.
My criteria for short term savings account is still the same:
- Not to lose money
- Have liquidity not longer than 1 month
- Better than fixed deposit returns
- Easy to understand
- Not overly complex
The current fixed deposit rates for 12 month duration varies from 0.25% to 0.35%.
This time round, I tried arranging them according to which I think are the low hanging fruit, follow by the more attractive ones.
The Hurdle Savings Accounts
Hurdle accounts are accounts that pays you higher interests between 0.8% to 3.55% if you manage to bank a lot of services with one bank.
Some of the most common hurdle accounts are:
The level of services differs from banks to banks.
Their aim is to get you to bank as much with them as possible.
The following table shows the level of interest you can earn, if you credit $4,900/mth in salary, spend at least $550/mth in credit card and one more service.
Given that you satisfied these hurdles, you will get to earn the above bonus interest. There is a maximum amount that the interest is applied on. This also differs from bank to bank.
The able above shows if your earning, spending is as such Maybank and Bank of China (BOC) might be the highest interest deal.
However, if you only can satisfied 2 hurdles, in this case a salary credit and spending 500 on the credit card, then DBS and BOC looks good.
The most important hurdles to earn high interest are:
- Salary credit
- $500 minimum spend on credit cards (do read the terms and conditions, not all transactions are counted)
The $500 credit card spend can be a high hurdle, especially for you if you are trying to keep your expenses down.
If you have this problem, DBS Multiplier is the most appropriate as you just have to ensure
- you credit your salary
- your total transactions add up to $2000/mth (in the example above salary of $1800 + credit card spend of $200 = $2000)
If you are a freelancer without fix salary credit, then the best account is UOB One Account, because it does not require salary credit.
Note: The banks can change the terms and conditions to earn the bonus interest easily, so this interest is not cast in stone.
Citi MAXIGAIN Savings Account – Est 1.50% & higher for $15,000 to $150,000
Citibanks unique savings account is not new. It was around last time when I compiled the 2017 list.
However, I couldn’t add it in on time.
However, I rate this account higher than the rest below because short term interest rate is starting to get volatile.
However, it is also a bit complicated.
To earn this higher interest, you need to maintain a minimum balance of $10,000. So it is not for everyone. However, if you qualify for this, this interest scheme applies for the first $150,000.
However, the fall below is $15,000 for Citibank (meaning you have to maintain a balance of more than $15,000).
Thus, the minimum initial deposit looks to be $15,000.
In MAXIGAIN, your interest rate is made up of 2 portions:
- 80% of a floating 1 month SIBOR rate
- 1 to 12 counters of 0.1% each, which gets accumulated over time
#1 is the base interest. This is computed based on 80% of the 1 month SIBOR. So if today the 1 month SIBOR is 2%, then the base interest is 1.6%. If it is 0.5%, the the base interest is 0.40%. So this base interest will fluctuate month to month, depending on the 1 month SIBOR.
Citibank publishes a delayed version of the 1 month SIBOR. You can see in recent months it has been increasing as expectation of interest rate rises increases.
Currently, at the time of writing it is at 1.12%. So 80% of this is 0.896%.
Not bad for a base rate!
#2 is the bonus interest. Basically there are 12 counters of 0.1%. These counters increase 1 per month. So for the first month it is 0.1%, second month is 0.2%, then 0.3%….. to 1.2%.
This is provided you maintain $15,000. If any point, your deposit falls below the previous month, the counters are reset.
Thus, what they are making you do is to keep your money in Citibank and don’t take it out.
Also note that it doesn’t mean you earn 1.2% from the first month. You have to slowly build up.
Your interest earned will also count as increment to increase the counter, so you do not need to deposit new money into the Maxigain account.
If we add #1 and #2 together your interest could be from 0.996% to 2.096% at the end of 12 months.
If you seed the counters after 1 year with the minimum, you can then add more money in, in 1 year time to enjoy potentially 2.096% interest.
The average interest during the first year is probably 1.5%. After 1 year (if Citibank does not kill it) it is probably closer to 2%.
As a summary:
- High maximum amount
- High minimum amount
- both interest component is variable
- Suitable for emergency money
Singapore Savings Bonds (SSB) – Est . 1.55% for $500 to $100,000 and below
Singapore Savings Bonds was the last item last year, but I decide to bring this up because its getting more appealing.
The Singapore Savings Bonds is a wrapper that allows you to own Singapore Government Bonds, which are AAA rated.
The advantage of the SSB is that if you need the money, you can sell it and receive your money 1 month later:
The redemption period opens at 6pm on the 1st business day of each month and closes at 9pm on the 4th last business day of the month. Redemption proceeds will be paid by the end of the 2nd business day of the following month.
The returns you get will depend on how long you hold it for. The returns are illustrated below:
The appeal of SSB now is that the 1 year duration interest return have reached 1.55%. If you hold on for 1 year, you can earn 1.55%. If you hold on for one more year, the second year you earn 1.57% (follow the first row).
Short term rates is starting to get higher, while long term rates are getting lower. (this means the yield curve is like flattening)
If you held this SSB issue for 10 years, each year you earn an annualized 2.04%.
This makes it a very unique instrument to hold the funds you do not know when you will come to use.
Compare to one year ago in 2017, the 1 year yield to maturity is higher (its 1.05% in 2017).
The unfortunate thing is that there is a maximum cap of $100,000 in SSB you could own.
CIMB FastSaver – 1.00% for $1000 to $50,000
The CIMB FastSaver is one account that will give you 1% per annum.
It is rather no frills. The minimum deposit is $1000 and you can apply online and then transfer money into this account. This may be the reason why it is so popular.
There are some advantages as well:
- While you can earn 1% for the first $50,000, beyond $50,000 you get to earn 0.60% which is pretty nifty.
- Although you get to kick start by contributing $1000, you do not have to maintain a minimum of $1000 in the account, which makes this a pretty good emergency fund sometimes.
The FastSaver have been a default second account after the hurdle accounts for a lot of people.
Money Market Funds / Unit Trust – 0.80% – 1%, Depending on Funds
One channel that is seldom talked about in financial blogosphere are money market funds.
These are unit trusts which primarily invests in short term instruments, fixed deposits and like instruments. I will not say they won’t lose money in the short term, but their job is to provide predictable short term savings.
You can purchase these money market funds from online fund house like Fundsupermart. You will need to open an account with these fund houses. Whenever you want to purchase, you would buy the money market fund, then transfer the amount to the platform.
Fundsupermart also have a Cash Fund, which gives you some interest as well.
From the table above you can see the total returns. These returns listed are annualized, which means it is the compounded returns you earn per year.
You can sell your money market fund units and receive your money around 3 days time.
Compared to 2017, returns have improved for the money market funds, but not by a lot.
Let us take a look at the two unit trust in detail.
Lion Global Money Market Fund
Lion Global Money Market Fund was started in 1999 and it is one of the more dependable money market funds in Singapore. I have known this unit trust since I was exploring what are the stuff that can give me guaranteed returns higher than fixed deposits.
The fund will invest in high quality short-term money market instruments and debt securities. Some of the investments may include government and corporate bonds, commercial bills and deposits with financial institutions.
Its returns were much higher last time. This is because the fixed deposit rates were higher then in the early to mid 2000s. What you get from these money market funds are better than what you will get in fixed deposits.
Here are its current holdings:
While interest rate on this fund looks to be low at 1%, if interest rate picks up, this fund will do well. My experience with this fund is that its always better return than fixed deposits.
The amount you can buy can start off with an initial $1000 and then $100 subsequently. There are 2 level of charges you have to content with for unit trust:
- The Annual Expense Ratio – in this case 0.34%. This is embedded in the price per unit and not something you need to pay. I find that this expense ratio is crazy considering the STI ETF have a 0.30-0.40% expense ratio
- Platform Fee – Fundsupermart doesn’t charge a sales charge on purchase, but they do have a platform fee of 0.05% per quarter, which works out to 0.2% per year
To me, this is something that I find it difficult to live with. If I can earn after expense return of 1.2% for the Lion Global Money market fund, I have to deduct 0.2% for its platform fee. My return will work out to be 1%.
This is still equal to that of CIMB FastSaver, with no limit how much I can put in.
I really have to treat this as a form of short term savings that keeps my liquid funds that earns something much better than the traditional fixed deposits. If I keep looking at the costs, I will never put my money into this unit trust.
Philip Money Market
The Philip Money Market fund was started in 2001 and also develop a reputation next to the Lion Global Money Market fund as a place to park your liquid money.
From the composition, you can see that to get better returns, these unit trusts have been pushing into short term notes that have very short maturity (CMT MTN, National Bank of Abu Dhabi). They do run the risk that Capitaland Mall and a national bank will default on the note, thus impairing the capital you thought it will be safe.
The risk is extremely small, but still possible.
The Phillip fund have a higher expense ratio. It will take a lot of rewiring for me to look past that high expense ratio to put my short term funds into something like this.