Where To Park Your Savings When Banks Lower Interest Rates

Next to shopping and dining, hunting for the best high interest savings account ranks highly on many Singaporeans’ must-do list. When it comes to making our money work harder, the usual options include OCBC 360, DBS Multiplier, SCB Bonus$aver and of course, UOB One.  

Offering up to 7.8% on the first S$100,000 balance and upon fulfilling the criteria of salary credit of minimum S$1,600 and S$500 card spend, UOB One savings account offered arguably the most attractive bonus interest rates. This may change after an announcement early this month on upcoming changes to the account, based on longer term interest rate expectations.   

Here are some changes that will take effect from 1 May 2024:  

• Two new balance tiers of S$25,000 
• The max. interest rate will drop to 6.00% on the 1st S$150,000 (instead of S$100,000)
• The 1st $100,00 balance will earn 4.5% interest, upon fulfilling the salary credit and minimum S$500 card spend criteria

For those who have reached your first S$100,000 and are searching for low-risk alternatives to continue growing your cash, let’s take a look at the options available to park and grow our savings. 

Related: Safe-Haven Investments— What Are They and How Can You Invest in Them?

OCBC 360 – Up to 7.65% interest

One of the popular contenders for the best savings accounts, OCBC 360 lets you earn an effective interest rate of up to 4.65% a year on your first S$100,000 when you credit your salary, save, and spend using this account. 

This works out to roughly S$394.90 per month if you credit at least S$1,800 in salary, increase your average daily balance by at least S$500 monthly, and spend at least S$500 with your OCBC credit card. The interest can go as high as S$650 per month if you purchase eligible insurance and investment products with the bank. If your daily average balance is S$200,000 and more, you will earn an additional 2.4% interest. 

Related: Which High-Interest Savings Accounts Should You Open and Why  

Standard Chartered Bonus$aver – Up to 7.88% bonus interest

Yet another bank will adjust its maximum bonus interest rate (from 7.88% to 7.68%) from 1 May 2024. 

To qualify for the 4.88% bonus interest, Standard Chartered Bonus$aver’s criteria include salary credit of at least S$3,000, a minimum of S$2,000 on eligible credit card spend linked to the account, and at least three eligible bill payments made via GIRO or online banking. 

While the maximum interest rate for the minimum S$2,000 card spend has dropped from 2% p.a. to 1.40% p.a. and salary credit has dropped from 2.5% p.a. to 2% p.a., the bonus interest rate for insurance and investment categories has increased from 1.5% to 2%. 

Related: Pros and Cons of Investing in Fixed Deposits

Other Alternatives

T-bills

The Singapore Treasury bills (T-bills) are government bonds that mature in six months or one year. This makes them an ideal option if you’re looking for some liquidity while growing your cash, for instance, as part of your emergency fund. 

As an investment product, T-bills are considered a low-risk product with fairly consistent yields. This also makes it a good option to park your savings if you’re not interested in putting them in stocks or more volatile products. 

While the cut-off yield on the latest six-month Singapore T-bill auction on 11 April fell to 3.75% from 3.8% previously, it is still higher than most fixed deposits. 

One thing to note about T-bills is that you may not get the allotment that you want and you will need to hold your allotment to maturity. 

Related: What Are T-Bills ETFs and Should You Buy Them?

Singapore Savings Bonds (SSB)

With an average return of 3.06% over 10 years, the Singapore Savings Bonds (SSB) has delivered fairly consistent returns, with its flexibility being one of the reasons why investors flock to it. 

You can choose to hold SSBs for up to 10 years, with the option to redeem them at any time without incurring penalties. The longer you hold an SSB, the higher the interest rate you’ll receive, providing you with an incentive for long-term investment.

Accessibility is another reason for its popularity. SSBs can be purchased for as little as S$500, which makes it attractive to a wide range of investors. The downside is that there is a cap to your investment, as the maximum amount that an individual investor may hold at any one time is S$200,000. 

Similar to T-Bills, SSBs offer relatively low returns compared to riskier assets.

Related: Fixed Deposit Vs Singapore Savings Bonds: Which Should You Go For?

Money Market Funds

The popularity of money market funds trended a few years back, when robo-advisors and online brokerages started gaining traction among new investors.  

Granted, the relatively modest returns may not keep pace with inflation and fund management fees may eat into your returns. 

The beauty of money market funds lie in diversification, as they invest in a diversified portfolio of short-term, high-quality securities. This reduces the risk of individual defaults. Investors also get high liquidity, as shares in money market funds can be easily bought and sold.

These funds are managed by professionals who aim to maximise returns while maintaining capital preservation. However, do note that unlike fixed deposits, money market funds are not protected under the Deposit Insurance Scheme. 

Related: Effective Techniques To Make Value Investing Work For You

Conclusion

In addition to choosing a high-interest savings account, diversifying and growing your money in other low-risk instruments will help to enhance your portfolio. 

Choosing the right low-risk investments in Singapore depends on your investment goals, time horizon, and risk tolerance. While T-Bills and SSBs offer government-backed security and flexibility, money market funds provide diversification and professional management. On the other hand, fixed deposits offer guaranteed returns but come with liquidity constraints and lower interest rates.

Remember, while low-risk investments may offer lower returns, they provide a level of capital preservation that can be invaluable, especially in uncertain economic times. Consider these pros and cons carefully and perhaps consult with a financial advisor to determine the best investment strategy for your S$100,000. 

If you’re looking for alternatives to park your cash, check out our roundup of the best savings accounts, online brokerages, and robo-advisors in the market now!

Read more:

7 Most Popular Types of Investments in Singapore

What Are Singapore Treasury Bills and Are They a Good Investment?

T-Bills vs Singapore Savings Bonds vs Fixed Deposits vs Endowment Plans: Which Investment is Right For You?

Should You Buy 6-Month or 1-Year Singapore T-Bills?

Five Ways to Diversify Your Investment Portfolio

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