I went to check the latest rates for the Singapore Savings Bonds (SSB) to maybe park some of the family savings there. To my surprise, rates have fallen so badly!! Putting funds inside for 10years will yield less than 2%/y average return now!
I scrambled to do some research.
For the issue back in Nov2015, the interest rate was substantially higher at 2.78%/y if you invested for 10year. Almost $260M was invested as those who were interested probably put in the maximum of $50,000/issue for it. Between you and spouse, you may invest up to $200,000 in total for SSB if both of you are citizens/PR.
Fast forward to the March2016 issue, less than $25M was invested. It seems that most who are keen have already joined.
Is SSB popular among young families?
From this “Profile of SSB investors PDF”, only 1/3 of the account holders are less than age40. With each new issue of SSB promising less returns, this profile is not going to change anytime soon.
SSB is risk free but as highlighted in our previous posts “Find out which is the best short term investment” and “Must read before you invest through crowdfunding” , there are other investment alternatives to consider.
If you want to invest in SSB what should you do?
From the interest rate table, it makes sense only to invest if you intend to own it for at least 3years. For the first 2 years, interest rates are ONLY AT 0.9%. You will likely find even better rates with fixed deposits. However, in comparison to the prevailing bank savings rates of 0.05%, you may be still better off.
You could maybe wait for an issue in future with better rates and invest your “emergency family funds” there.
If you believe in the above suggestion, I hope you make a decently sized investment. Almost 50% have invested less than $10,000 and it just doesn’t seem to be worth all the effort. $10,000 at 1% interest and after the $2 charge will yield you only $98 after waiting 1 year!
I will continue to monitor the SSB. If there are changes in future, I’ll share them with you.
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