Two of the biggest benefits of putting money in the bank are:
- Capital Guarantee
- Flexibility Withdraw Anytime
But the bank interest rate, e.g. Singapore’s largest POSB/ DBS Bank, is almost negligible at 0.05% per annum. Over time, the value of money gets eroded with inflation.
Now, if you have another investment choice that has close to the above advantages but gives you significantly higher returns with almost zero risk, would you consider it?
In this article, I am going to share with you how you can park your money in Singapore Savings Bonds (SSB) instead of putting them in your bank accounts. SSB is capital guarantee and the longer you park your money there, the higher the average interest you earn per annum.
In a current low-interest environment, the average return for 10 years is still a decent 1.45%. Back then when SSB was first introduced in 2018, I bought an SGS Bond which gives an average annual return of 2.63% over 10 years. Every month, there will be a bond contract released with different rates (which may be higher or lower than the previous months), so you can monitor and buy at the returns that you are satisfied with.
You can choose to redeem your bond after the contract expires in 10 years or any time from the date of purchase. You can redeem in multiples of $500 up to the amount you have invested for each bond. More info on how to redeem SSB can be found in this link, How to Redeem SSB Bond?
Let’s look at the extra interest that you can earn if you were to invest $10,000 in SSB over 10 years, as compared to putting that $10,000 in the banks.
After 10 years, you will be earning a total compounded interest of $1,548.37 as compared to $50.11 from the banks, which is 30 times the interest the bank offers.
If you are also an investor and feel that the stock market is over-priced, you can park your money in SSB first while waiting for the market to correct before redeeming the bond to free up extra cash for your investment when the stock market corrects. SSB can also be the emergency funds that you can activate on rainy days or in emergency situations where you, unfortunately (touch wood) lose your main source of income.
For more information on SSB and the prevailing month’s interest rates, please check out MAS website, Singapore Saving Bonds. If you find this article useful, please share it with your friends or family members so that they can benefit from these smart money decisions too.
*** Update On 4th May 2022 ***
As interest rates are raised by central banks all over the world, the bond rate interest is getting attractive as well. For the coming month’s bond interest, the average interest rate over 10 years is 2.53%, which is close to the higher interest rate in 2018, when SSB Saving Bonds was first introduced.
The actual interest payout per year is as follow:
If you invest 10,000 now and hold your bond till maturity, you will get $12,549.
That is beating your bank interest by 50.8x!!
So, what are you waiting for?
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in the past, the Citibank Maxigain account used to generate above 2% interest per annum with consistent savings up to 70,000 in one account. unfortunately in covid tiems it has been revised almost every quarterly and dwindled to a max 0.6% and in november it will become 0.3% 😦 SSB interest rate is also on a downward slide. the average is due to stronger years due to higher interest. whats the likelihood of SSB interest rate springing back, which currently is 0.34%?
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Hi Ivy, thanks for dropping by. Yes, that’s right, pre-covid days, I was earning a good 2% ~ 3% off my BOC smart saver account. But now, the interest rate offered has dropped significantly. I think the likelihood of interest rate increasing across all levels, be it SSB or saving accounts, very much depends on the tapering of Quantitative easing (QE) by US central banks and subsequent interest rate increase, which is forecasted by many analysts to start from mid 2022.
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