Ever since I started “hacking” my way to earn more on my cash, I’ve since grown accustomed to earning at least a high 1+% to a low 2% with minimal effort on my savings (parked in high-yield bank accounts).
However, that era is likely over (for now) as we move into a period of near-zero interest rates. Instead of relying on our bank accounts for higher bonus interest, it is time to explore other alternatives.
I did this recent guide on Instagram where I covered some options for you to park your cash savings, ranging from lowest risk to highest, and without needing to invest or subject your funds to stock market volatility.
Bank savings accounts – after the recent cuts, most of you are probably getting below 1% now on your UOB One / OCBC 360 / DBS Multiplier account.
Fixed deposits – these are paltry at 0.35% to 0.5% p.a. on average across all the different providers, and with a lock-in period of 12 months. The best offer right now is by Hong Leong Finance, which requires a minimum $20,000 deposit for 36 months (3 years) and gives you 0.75% p.a. in return.
Singapore Savings Bonds – I excluded this from the guide because its current rates are dismal and are hardly attractive (this month’s bond is 1.15% for 10 years, and only crosses into the 1% domain in your 5th year…)
Short-term endowment plans – I’ve covered some of the more attractive ones on this blog in the past few months, but some of them are already sold out due to the high demand.
Cash management accounts – similarly, I did a comprehensive review across the different providers in this space recently, but some of you wrote to me saying that you weren’t entirely comfortable with the fact that the funds are invested (albeit mostly in money market funds and bond funds) and that the rates aren’t guaranteed.
So what is one to do if they have spare cash that you’re looking for decent returns on?
In today’s environment, your best bet would be to either
(i) continuously look out for safe and guaranteed offerings by the financial institutions, or
(ii) decide if you want to take on a little more risk in exchange for higher returns
Since I’ve already covered (ii) in recent posts, I’ll focus on (i) today for the risk-adverse folks / savers.
I don’t expect the banks to raise their interest rates anytime soon (unless the Fed does, and the world decides it is time to up interest rates on borrowings), so that option is out. Either stick with your < 1% or start looking around for other options.
The same goes for fixed deposits. In fact, with rates being so poor right now, I’d personally rather park my savings in a high-yield bank account where I’ll at least get the same, if not a slightly higher rate, without having to lock-up my funds. The trade-off for the payout just isn’t worth it.
Your best bet would be to go for short-term endowment plans. These have been popular in recent times, and are likely to continue to sell out fast each time a new tranche is launched, so you’d want to pay attention and look out for promotions.
One of the best offerings right now, for instance, is Great Eastern’s GREAT SP Series 3.
At 1.55% p.a. for a 3-year tenure, it even beats having your savings in a high-yield bank savings account (of course, if you’re one of the rare few who can hit higher than 1.55% on your bank account and have yet to hit your max. limit for bonus interest rates, then you may want to reconsider).
GREAT SP Series 3
Key Details:
- 1.55% p.a. guaranteed returns at maturity
- 3 years commitment
- Single premium plan (i.e. just pay once)
- Minimum premium: $10,000
How does it stack up against other options?
There’s no fight when you compare this to fixed deposits – GE GREAT SP Series 3 definitely wins hands-down.
As for how it stacks up with other short-term endowment plans in the market right now, it is also pretty much the best rate at this tenure and minimum deposit requirement. There’s only one other plan higher than this is 1.63% p.a. for the same 3-year tenure, but the trade-off is that you need to commit a minimum of 3 time more capital ($30,000) and you cannot buy the plan online. The other options barely stack up, such as:
- 0.82% p.a. for 3-years, min. $5,000
- 1.17% p.a. for 5 years, min. $20,000
- 1.22% p.a. for 5 years, min. $50,000
If you don’t want any surprises (or heart attacks) when it comes to your cash, you’ll be pleased to know that the GREAT SP Series 3 not only guarantees your capital, but also provides a guaranteed return of 1.55% p.a at the end of 3 years.
