Fixed Deposits, SSBs, T-Bills, or Cash Management Portfolios?

07 December 2022

Here’s what to do with your cash in Singapore in an environment of high inflation and rising interest rates.

If you’ve noticed the price of your daily necessities like food and transport creeping up, you’re not alone. Headline inflation in October 2022 came in at 6.7% year-on-year, with the largest year-on-year increases in food prices (7.1%), private transport (17.3%), and electricity and gas (19.0%).

And with the GST increase that will take effect in January, high prices are probably here to stay: headline inflation is expected to average between 5.5-6.5% in 2023. Interest rates are rising too, which means that monthly repayments on our cars or mortgages are set to rise.

So, it’s increasingly important that our cash is working harder for us, since any funds that we leave in low-interest savings accounts effectively lose value over time. The good news is there are now multiple low-risk options to stash your cash, including fixed deposits, Singapore Savings Bonds, T-Bills, and cash management accounts.

Here’s how they stack up against each other, and how you can choose the best option for you.

Low-risk options for your cash in Singapore 

1. Fixed deposit (FD) accounts 

Banks in Singapore have been raising their fixed deposit rates as interest rates rise. Currently, most banks offer between 3-4% p.a. on 12-month FDs.

How do fixed deposit accounts work?

You place your funds with the bank for a set amount of time (typically 3, 6, 9, or 12 months – or even longer). At the end of the period, you get your initial deposit back plus interest.

Things to note about fixed deposits:

While it's possible to withdraw funds from your FD account before the end of the tenure, you might have to pay a penalty for withdrawing early, and will probably have to forfeit any interest you’ve earned so far. The return on your cash is fixed when you first deposit your funds, so you can’t switch to a higher rate even if prevailing interest rates rise.

2. Singapore Savings Bonds (SSBs)  

Guaranteed and issued by the Singapore government, SSBs provide investors a safe and flexible option for their long-term savings. You cansee the returns on this month’s SSBs here. How do Singapore Savings Bonds work?

SSBs are issued monthly, and the interest rate varies with each issue. They mature in 10 years, and you get a different interest rate each year you hold the bond. You can sell out of the bond at any time, but the longer you hold on to the bond, the higher the interest rate you enjoy. SSBs pay out interest every 6 months.

Things to note about Singapore Savings Bonds:

Once you submit your redemption request, you get your principal back (along with any accrued interest) by the second business day of the following month.

3. Singapore Treasury bills (T-bills) 

T-bills are short-term Singapore government bonds with 6-month or 12-month maturities. As of 30 November 2022, the 6-month T-bill yielded 3.91% and the 12-month T-bill returned 3.8% p.a. You can view upcoming auctions for T-bills here.

How do T-bills work?

You buy T-bills at a discount, and receive the full face value of the bill upon maturity. For example, if you buy a 6-month T-bill worth $1,000 with a yield of 3% p.a., you’d only pay $985 upfront. You’d get back the full $1,000 after 6 months.

Things to note about T-bills: 

Unlike SSBs, where you know the exact interest rate you’re getting upfront, T-bills are issued by auction, and you’ll only find out the exact yield on your T-bill when the auction results are announced.

4. Cash management options 

Cash management portfolios are low-risk investment products commonly provided by robo advisors or brokerage firms. These portfolios typically invest in one or more high-quality short-term funds to help you earn a return on your cash.

How do StashAway’s cash management portfolios work?

Our ultra-low-risk cash management portfolios, StashAway Simple™ and Simple Plus,  let you earn a return on your cash with no minimum investment amount and no lock-ins.

StashAway Simple™ invests in a money market fund and an ultra-short duration bond fund. As of publishing, it has a projected return of 3.7% p.a. and hasn’t seen a single week of negative returns since inception. Simple Plus invests in slightly higher-risk ultra-short and short-duration bond funds, in exchange for a higher earning potential. Simple Plus currently offers a yield to maturity of 4.5%. 

Things to note about Simple and Simple Plus: 

They’re the most liquid out of all the above options for your cash: you can withdraw your funds at any time, without any penalties.

FDs vs SSBs vs T-bills vs StashAway Simple™ and Simple Plus: at a glance

Minimum deposit amountLock-in periodReturn on your cash (as of December 2022)
Fixed depositsYes - from SGD 500-1,000,000Yes3-4% p.a. on 12-month fixed deposits
SSBsYes - SGD 500No - but the longer you hold the bond (up to 10 years), the higher the returns on your cash2.9-3.2% p.a., depending on how long you hold the bond
T-billsYes - SGD 1,000Yes - 6 or 12 months depending on the tenor of your T-bill3.8-3.9% p.a.
StashAway's cash management portfoliosNoNoSimple: 2.8% p.a. | Simple Plus: 4.6-5% p.a.
Bank savings accountsNoNo0.1-3% p.a., depending on how many conditions you need to fulfill to achieve those rates

So, how do you choose the best option for your cash?

Think about what you’re saving for: if you’re building an emergency fund and need the cash to be available on short notice, then highly liquid, low-risk options like StashAway Simple™ or possibly Singapore Savings Bonds might work for you.

If you’re saving for a goal that’s further out, such as renovating your apartment in 2 years, you could consider:

  • a slightly higher-risk, higher-return option like Simple Plus, or
  • fixed deposit accounts or T-bills, if you’re comfortable locking your cash in for some time.

And finally, here are our best tips for beating inflation

Cut down on unnecessary spending, and keep enough cash on hand for emergencies. Prioritise paying down high-interest debt. Most importantly, keep investing the money you don’t need in the near future – that gives you the best chance at beating inflation and reaching your long-term financial goals.

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