When Should You Choose Fixed Deposits over Singapore Savings Bonds?

When Should You Choose Fixed Deposits over Singapore Savings Bonds (SSB)?

3 min read

Singapore Savings Bonds (SSB) is classified as one of the lowest risk investment in Singapore, mainly due to the fact that SSBs are offered by the Singapore Government and also backed by them.

If you like to know more about SSB, you may read about them here.

When Should You Choose Fixed Deposits over Singapore Savings Bonds?

TL;DR – Have Both in your Investment Portfolio

  • SSB – An amount set by your bond allocation in your investment portfolio.
  • Fixed Deposits – Your emergency funds.

Fixed Deposits

  • Constantly updating their interest rate offer.

I did a quick search on the current Fixed Deposit rate with the lowest deposit required:

Interest Rate per year1.20%1.25%1%
Duration (Locked-in)5 years4 years3 years
Min. Deposit amount (S$)1,0005,0005,000

Singapore Savings Bonds

The interest rates over 12 months of issuance:

 SSBFixed Deposits
Duration10 years3 years
(offered by UOB)
Min. amount required$500$1,000
Average returns2.17%
(over 10 years)

The average interest rate for SSB would be 2.17%.

SSB VS Fixed Deposits

 SSBFixed Deposits
Duration10 years3 years
(offered by UOB)
Min. amount required$500$1,000
Average returns2.17%
(over 10 years)

This Month’s SSB (August 2018)

YearInterest %Average return per year %

Source: Singapore Savings Bonds

For example, if you need to cash out your SSB, having invested $10,000, at the end of your third year, the interest that you have earned on average is 2.10% p.a. which amounts up to $630.

SSB Versus Fixed Deposit

Using the Fixed Deposit rates offered by UOB above at 1% for 3 years, your $10,000 would have only earned you an additional $303.01 on interest.

That is an opportunity cost of $320.99, that is about 52% (51.44%) on your potential return if you have chosen SSB if you manage to be allocated your lot.

Other Products Similar to the SSB

There are other products similar to SSB,

ProductsInvestment HorizonFlexibilityReturns
Singapore Savings Bond (SSB)Long / 10 yearsYesAround 2%
Short Term Endowment
(e.g. FWD and Great Eastern)
Short / 3 yearsNoAround 2%
CIMB Fast Saver
(Savings Account)

With all the frills for opening a high interest yielding savings account and liquidity restriction with short-term endowment plans, I feel that investing in the SSB would be the better option.

When Should You Choose One Over the Other?

Whenever this topic gets discussed in our Seedly Community, the majority of us would choose to place our money in SSB over FD. With only a handful of people, would opt for the latter.

Choosing Fixed Deposits

When you need to withdraw the money immediately.

  • Fixed Deposits allows you to withdraw your money immediately.
  • SSB requires about 7-30 days to withdraw your money.

When you have a big amount, amount big enough that you are able to negotiate with the bank a higher fixed deposit rate.

  • The maximum amount of SSB you can hold is $100K across all SSB issues.
  • For SSB, you might not be allocated the entire amount you opted for.
    – Meaning, although you have opted for $10,000 SSB, you might receive only $6,000 worth of SSB allocation.
  • There is no limit to how much you can hold in Fixed Deposits – however, only $50,000 of your deposit is covered under SDIC.

In the event a Deposit Insurance Scheme member bank or finance company fails, all of your eligible accounts with that member are aggregated and insured up to S$50,000. Trust and client accounts held by non-bank depositors are insured up to $50,000 per account. 

Choosing Singapore Savings Bonds

Due to bonds having an inverse relationship with market interest rates, the interest rates offered by the SSB every month are irregular, and because of that sometimes you might feel “short-changed” by your investments.

There are a few ways that you can hack your SSB investments like withdrawing your existing SSB investment to invest in the current month’s SSB if the interest rate offered is higher.

With liquidity being the only disadvantage when it comes to investing the Singapore Saving Bonds, you should have set aside at least 6 months worth of your salary as emergency funds before embarking on your investment journey.

The SSB x FD Strategy

Answering to the title, I feel that you should not choose one over the other but have both in your portfolio working hand in hand.

How much to place in your Fixed Deposit?

  • 6 months worth of your salary = Your Emergency Fund

In any case of an emergency, you are able to withdraw your emergency fund immediately whenever you need them. If you don’t need them, you get to enjoy higher interest on your deposit.

If you have a high interest yielding savings account like DBS MultiplierOCBC 360UOB One etc., you may use them as well to hold your emergency fund to earn yourself that additional interest!

How much to place in Singapore Savings Bond?

  • The percentage set by yourself to hold bonds in your investment portfolio.
    It depends if you are a risk-adverse investor or an aggressive investor.
  • With SSB being an almost risk-free form of investment here in Singapore, it is your choice how much SSB you would like to hold in your investment portfolio to balance them out.

How much does SSB take up in your investment portfolio and what kind of an investor are you? Let us know in the comments section and share with us on your own personal finance journey!

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