Singapore Saving Bonds (SSB)
Asked on 04 Nov 2019
I don't know much about investing but I want to put this money somewhere at least. I read up a bit and SSB seems like a good option but as I'm not very familiar with investing, I'm not sure if I should just put the money in a bank instead. I also wanted to know if SSB interest rates change every month and if this month's rates are considered good. I would ideally want to put my money somewhere and forget about it till perhaps 1-2 years after graduation.
SSB is a very safe form of investment and if you do not know what or where to park your money, it is not a bad choice either. You'll do better compared to leaving it in the bank, and your capital is guaranteed. It's just that liquidating it takes up to one month, although you will be getting accrued interest, unlike an FD.
Each month, the new tranche of SSB will have different interest rates. Right now they are a bit low, so you might want to wait for a better rate. You'll need a CDP account with direct crediting service to apply for SSBs. Although the maximum benefit is obtained by holding it for the full 10 years, there's nothing wrong to redeem it when you need the funds.
04 Nov 2019
Hmm. So your parents are loaning you seed money. Seed money for what? To start your own company? In which case you need some measure of liquidity?
To learn about investing? On which case they may have some expectations on how it is used? (SSB barely counts as investing I think. A high interest savings account might well net you just as much...)
To grow your future retirement money while keeping capital safe? Then you might consider parking it in CPF SA for 4-5% risk free. Except you can't touch it until you hit 55. Even CPF OA (2.5-3.5%)will net you a higher return than SSB. And you can use it for housing and possibly education fees I think.
So yeah. I think an important question to ask and clarify is, "what is the seed money for? Do your parents have any expectations about it?"
I will recommend putting in a small percentage into SSB.
Use your age as reference, if you are 22 then put 22% of your money into SSB
But you will need to take note whether is the returns from SSB is the highest among similar risk of investment products. If fixed deposits give higher returns than SSB, then it will be better to put into fixed deposits instead.
Next regarding the remaining amount assuming that you have insurance settled, it will be good to learn how investment works and the different investments available. Learn how each investment works from experienced gurus and the skills needed to profit from investment. Putting money into investment without knowing how to do it will be risky in the long term.
I write cool stuff about personal finance and money-saving hacks here.
It's great that you have the mentality of wanting to grow your money rather than placing it in the bank and watching it's value decrease due to inflation.
SSB is indeed offers a safe avenue to grow one's wealth. However, looking at the rates published for Nov'19. One can see that even if you were to hold the bonds for 10 years, the average interest rates doesn't even hit 2%.
I recently placed my money into Stanchart's Jumpstart savings account. It offers 2% interest that is paid on a monthly basis, hence your compounded interest will equate to an interest rate higher than that of 2%.
Some T&C's to note of:
1) Only valid for first $20,000
2) You need to open the account before 27 years of age.
3) There isn't any information on what the interest rate will be after you cross 27. However, it will still remain constant at 27 should there be no change in terms.
You can find out more about the Jumpstart account here
I know you specifically mentioned investments, but I would like a wider view if the objective if to maximize money.
At university, you basically have your entire working life in front of you. You should try to identify growth industries you have an interest in and find courses that you couldn't afford otherwise and use the seed money to develop your human capital.
The ROI (being increased income/opportunites) for rest of your life would far outweigh a few years of SSB interest.
I must first say that I'm in no qualified position to advice but I do think that given your circumstance, maybe you can consider an RSP (small amount and definitely doesn't have to be the entire $10k sum) where you invest a monthly of a smaller portion of that $10k as part of "Savings".
SSBs are a really safe vehicle of investment and definitely suitable for your circumstance if you wish to simple forget about the savings completely. From my experience, I would like to have be just a tad bit more adventurous (like really just a small bit) because liabilities can become big easily once you graduate. The decision is yours ultimately because you know your financial position and situation the most!
Considering the volatile environment currently, bonds are definitely tempting to hold onto without time available to study and understand the different asset classes that might have been suitable for you!