Is the Singapore Saving Bonds (SSB) Still Worth It?

Simply put, the Singapore Saving Bonds (SSB) is a government-backed, almost risk-free investment, where you can get back your investment amount fully with no penalty should you decide to withdraw.

How it works

Unlike bonds, SSB works similarly to fixed deposit (FD). Every month start, SSB issuance will open for application with a pre-determined interest rates. Every half yearly, the interest on the amount you put in are calculated and credited to your account based on that year’s interest rate.

The interest of each issue will varies, and interest rate of each year in one issue is usually different. The longer you hold it, the higher the interest. Below is a sample of the interest rates of a SSB issue. The 2nd row of the table is the interest for the year, and the 3rd row is the average interest you would get if you hold for X years.

Each issue goes for a maximum of 10 years and you can withdraw them at any point in time with no penalty to your principal sum. It has a low barrier of entry with the lowest quantum you can invest as $500.

2020 Historical Interest Rates

The above is the interest rates offered for the year of 2020. Due to COVID-19, the economy have been impacted, and we can see that the interest rates have drastically dropped from the May issue. With many news articles painting a gloomy situation, it is likely that we are looking at a further decrease in the interest rates.

Should you still put your money in SSB?

Better options with higher returns

Are you able to put these money to better use and get better returns in other financial instrument such as stock, bonds or even options? If you are able to make your money work for you in other avenues, SSB may not be as appealing.

Otherwise, if you think you cannot get a better returns in other places as compared to what is offered by SSB, it could be a temporary avenue to park your money while awaiting better opportunity.

Access to funds

While it is relatively easy to place a request to withdraw the funds from SSB, you would need to wait for the start of the following month of request for the money to be transferred back to your account. If these funds are meant for immediate use or for emergency, it may not be ideal to park them here where it cannot be access immediately.

Risk appetite

Usually, SSB appeal to people who are generally risk adverse or are looking to balance their portfolio with low risk financial instruments. As long as the interest rates offered by SSB are higher than the pathetic 0.05% basic interest rate that most banks offer for their saving account, it could still be considered a safe haven to get a slightly better interest rates.

Last words

Apart from SSB, the other most common low-risk financial instrument tools are fixed deposit (FD) and high interest accounts. While interest rates are falling across board, if you are looking for substitute for SSB, these are the possible alternatives that you can consider.

If you think you can do better than what they are offering, SSB may not be suitable for you. If you want a no-brainer, no effort, almost risk-free investment, you could assess if SSB will fit into your financial portfolio. At the end of the day, each of our financial situation is unique and it is important to consider every aspect before making any financial decision.

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