The company that I am currently working for in Tokyo has a cafeteria that serves free lunch to all employees, hence during lunchtime, we would get together for lunch and chat.
Occasionally, the topic about money management would come up, and to date, I have yet to find a Japanese colleague who invests in the stock market, citing reasons of either finding it too risky, lack of knowledge, or more commonly, both.
They would instead keep their money in the bank that gives virtually zero interest. In fact, banks in Japan charge you for withdrawing your own money from the ATM! However, the habit of keeping money in the bank is not unique to Japan because even in Singapore, I personally know quite a few people who do that.
How about you? Do you keep your extra cash in the bank? If so, I hope that I can convince you in this article that there is an investment instrument that is safer, yet gives higher returns than a savings accounts, and does not carry the penalties of early withdrawal of fixed deposits.
Firstly, I assume that you are putting your money in savings accounts for two main reasons: flexibility (can take out your money anytime) and very low risk (bank won’t go bankrupt easily). But do you know that there is something called Singapore Savings Bond?
Singapore Savings Bond
“Investors can redeem their Savings Bond with the Government in any given month before the bond matures, with no penalty for exiting the investment early.”
Flexibility without penalty? Check.
Singapore Savings Bond is fully backed by the Singapore Government and it even guarantees that you can get back the amount you put in whenever you want irregardless of how the market interest rate changes. This makes Singapore Savings Bond literally risk-free. Read more here.
What returns would Singapore Savings Bond give you? In the latest bond issue on 1 March 2016, the first year’s interest would be 1.09%. No savings account in Singapore gives an interest rate even close to 1%. Most time-deposits do not even give beyond 1%, and those that do come with many fine print and conditions and of course, penalties for early withdrawal.
Furthermore, Singapore Savings Bond uses a step-up approach, so the longer you keep your money with the Singapore Government, the more interest it would give you. For the 1 March 2016 issue, interest from the 5th year onward is 2.95% and in the 10th year, it is 3.35%. Click here to learn more about 1 March 2016 issue.
Higher interest than banks? Check.
With flexibility without penalty, risk-free, and higher interest than banks, I hope that you are at least convinced that the Singapore Savings Bond is worth considering. Here is how to apply for the Singapore Savings Bond!
Lastly, if you are one of those who believes in owning physical properties with your extra cash in order to generate a stable passive income for your retirement, do read this article to learn more about REITs, which is a much easier way to become a property owner without all the hassle.
p.s.: This is not an advertorial and I was not approached by Singapore Savings Bond to write this article. It’s just that a good friend from Singapore was visiting and he shared that both he and his wife keep all their money in a savings account, and was wondering if there were better options out there. So, this article is specially dedicated to you, Winston!