Just this year, The Federal Reserve made the bold move of slashing interest rates by 150 basis points in two weeks to combat the impact of the pandemic to the economy. Even though lower rates are supposed to be beneficial to the economy, banks’ net interest margin have been pressured and resulted in cutting of interest rates in hopes of saving its own NIM. Savers are at the mercy of the banks when it comes to interest rates. Recently, several savings products popped up to meet the needs of high yield savers.
In this article, we will discuss the feasibility in using such products as an alternative to your usual savings account.
High Yield Savings Account
Be it DBS Multiplier, OCBC 360, UOB One or Standard Chartered’s Bonus$aver. You have chosen your high yield savings account because it meets your daily needs.
I would actually recommend you to stay on as the reduction in interest rate is across almost all accounts. As readers have different needs, it will be difficult for me to recommend the specific accounts. Therefore, you might use an online tool such as the savings account calculator by Seedly. You can use this tool to determine whether you would like to stay on with your current savings account or to try out another savings account that gives slightly higher interest based on your needs.
However, depending on how much more interest you can eek out from trying out another savings account, it is all about whether the change is worth and also whether it caused any additional inconvenience such as shortage of ATMs for withdrawal and deposits. So, it is not necessary for one to change for better savings but cause additional inconvenience.
RHB’s High Yield Savings Plus Account – The Alternative to CIMB’s FastSaver
Miss CIMB FastSaver’s 1% interest? You can look forward to RHB’s High Yield Savings Account which offers up to 1% on your deposits. The initial deposit is $1000 with no fall below fees and lock-in period.
RHB supports FAST transfer and is one of the DI members under SDIC which means up to $75k is insured by SDIC. This makes RHB High Yield Savings Account an attractive alternative to no frill CIMB FastSaver when it offered 1% interest previously.
Understand Cash Management
You might have heard of the saying “do not put all your eggs in one basket”, this saying is relevant in the context of where to keep your cash. Before Cash Management became popular among retail investors in Singapore, almost all will have their money in different banks.
A report explains the risk of depositing money in a bank. In the case of a bank were to fail, depositors will face credit risk from the insolvent bank when they are not able to get back their deposits. After the Global Financial Crisis, Singapore Deposit Insurance Corporation was introduced after the Global Financial Crisis to prevent future bank run. It insures up to $75,000 in the event a Deposit Insurance member fails. For an individual to be covered under SDIC for more than $75,000, it has to open many bank accounts with other DI members and spread the deposits into different DI members.
However, in this low interest rate environment, where many banks have already started reducing its interest rate on savings accounts, Cash Management comes into handy as an alternative for yield hungry savers.
Cash Management in Singapore got popular recently when Stashaway introduced its own called Stashaway Simple. Roboadvisors such as Stashaway, Endowus and Moneyowl invest in clients’ funds in Cash Fund, Money Market Fund and Short Duration Bond Fund.
The underlying asset of Cash Fund like the one being invested in Endowus Cash Smart and MoneyOwl invests in a diversified portfolio of institutional bank fixed deposits. It has the lowest risk among the funds mentioned above with a maximum drawdown of 0.01% using historical data.
Both Endowus Cash Smart and Stashaway Simple invest in Money Market Fund where its underlying assets consist of institutional bank fixed deposits, high quality investment-grade and very short duration government and corporate debt instruments. Money Market Fund carries slightly higher risk compared to Cash Fund where its maximum drawdown based on historical data is 0.05%.
With the arrival of EndowUs Cash Smart, it exposes retail investors to investing in Short Duration Bond Fund. As the name implies, Short Duration Bond Fund invests in a diversified portfolio of institutional bank fixed deposits, high quality and investment-grade short duration government and corporate debt instruments. Short Duration Bond Fund carries the highest risk among the three funds with a maximum drawdown of around 2% based on historical data.
Best Alternative Savings Product (2020)
#5 Endowus Cash Smart
Endowus recently joined Stashaway to introduce Cash Management service to retail investors. Endowus Cash Smart consists of two subproducts – Core and Enhanced.
Endowus Cash Smart Core
Endowus Cash Smart Core invests half of clients’ funds in Fullerton SGD Cash Fund and the remaining in Lion Global SGD Enhanced Liquidity.
Fullerton SGD Cash Fund invests in institutional fixed deposits that have maturity of not more than 1 year with Financial institutions such as Sumitomo Mitsui Banking Corp, Bank of Tokyo-Mitsubishi UFJ among others. The majority of these fixed deposits mature in less than a month with about 27.5% matures in more than 12 weeks. Though not disclosed in their factsheet, the fund might invest in fixed deposits that mature in more than 1 year but less than 2 year, subject to a maximum of 10% of the Fund’s NAV.
Lion Global SGD Enhanced Liquidity, which is used by Core and Portfolio, invests in high quality portfolio of debt instruments across various issuers in different sectors and tenures while maintaining a weighted average portfolio credit rating of A- and a weighted average duration of around 12 months.
Endowus Cash Smart Enhanced
Endowus Cash Smart Enhanced invests half of clients’ funds in UOB United SGD Fund and the remaining in LionGlobal SGD Enhanced Liquidity.
UOB United SGD Fund invests in money market and short term bearing debt instruments and bank deposits with a Weighted Average Maturity and Weighted Average Yield of Maturity of 1.61 years and 4.16% respectively.
The only fee that is charged by Endowus will be the Access Fee of 0.05% per annum, which I believe is reasonable. Like Stashaway, Endowus rebates the entire trailer it receives thus lowering the fund expense ratio it invests with clients’ funds. The projected return for Core and Enhanced after setting aside all the fees are 0.9% to 1.1% and 1.7% to 2.0% per annum respectively.
We should not be choosing Endowus Cash Smart Enhanced just because it has a higher projected returns but we should instead question how needy we need to utilise those funds.
Endowus disclosed the performance during the “Capitulation” stage in March 2020. It highlighted how the Endowus Enhanced lost 0.92% and took 50 days to recover from that slight drop. This shows that it is important to identify the amount of funds needed for short term such as for your daily expenses. It is not recommended to invest in your fund for daily expenses in Enhanced but instead look at Core to satisfy our need for higher yield returns on our cash.
My thoughts: I feel that Endowus Cash Smart as a product is as good as the one offered by Stashaway Simple. However, the dealbreaker in my opinion will be that the minimum sum to invest in this product is $10,000. I feel that this amount may be out of reach for some, especially teenagers.
It takes about 3 business days for the funds to be credited into a bank account after a withdrawal request has been submitted. With this in mind, I will not recommend putting their day to day expenses fund into any Cash Management but I would suggest investing their emergency fund into Cash Management instead.
Therefore, I decided to rank Endowus Cash Smart as the fifth best savings product to consider as an alternative to bank savings accounts.
#4 Stashaway Simple
Introduced late last year, Stashaway is the first robo-advisor that introduces Cash Management to retail investors. Stashaway Simple invests half of clients’ funds to LionGlobal SGD Money Market Fund and the remaining in LionGlobal SGD Enhanced Liquidity Fund. The only similarity between Endowus Cash Smart and Stashaway Simple is that both of which invest in LionGlobal SGD Enhanced Liquidity Fund.
LionGlobal SGD Money Market Fund invests in short-term SGD deposits, high quality short-term market instruments and debt securities. These investments may include government and corporate bonds, commercial bills and deposits with financial institutions.
The projected rate of 1.4% is nett after net fee charged of about 0.205% after including the trailer fee rebates.
My thoughts: As mentioned earlier, both Endowus Cash Smart and Stashaway Simple are equally good. The only difference will just be the minimum sum to invest in Endowus Cash Smart but Stashaway Simple does not have any minimum balance. Upon withdrawal request, it takes about 2-3 business days for it to be credited into a bank account so it is not advisable for day to day expenses fund to be parked in cash management. For individual who does not have $10k for emergency fund, it is recommended to consider Stashaway Simple instead.
Therefore, I decided to rank Stashaway Simple as the fourth best savings product to consider as an alternative to bank savings accounts.
#3 Singtel Dash EasyEarn
Singtel’s Dash EasyEarn is an insurance savings plan by Etiqa Insurance that is open to eligible Dash users to earn higher returns while enjoying the flexibility of anytime top-ups, withdrawals with no lock-in period of penalty. Dash EasyEarn also offers insurance coverage in the event of death.
With Singtel Dash EasyEarn, you can earn 1.8% per annum where the guaranteed interest rate is 1.5% p.a with additional 0.3% p.a as bonus for the first policy year. Returns are calculated daily based on the crediting rate of 1.8% for the first year and returns will only be credited after the calendar month if the average daily account value is equal or more than $2000 for the policy month.
The 1.8% per annum returns is applicable for the first $20k while the minimum initial sum to open Dash EasyEarn is $2000, in multiples of $500. The starting amount is S$2,000 and subsequent top-ups may be made in multiples of S$500. All top up is made within Singtel Dash app using eNets from one’s bank account.
Compared to Elastiq, Dash EasyEarn does not have any lock-up period. One can partial withdrawal any amount from their plan anytime. They can either withdraw to their Dash wallet account with no charges or to their bank account via PayNow at a fee of $0.70 per transaction, deducted from Dash EasyEarn plan. The minimum amount to withdraw is $100, and in multiples of $100 per withdrawal.
It is important to note that one has to maintain at least $2000 average daily account value to enjoy the returns and benefits of the plan and the entitlement of interest crediting at the end of the policy month.
Besides being functioned as an alternative to high yield savings accounts, Dash EasyEarn has a death benefit of 105% of Account Value. Once this payment has been made, the policy ends.
My thoughts: First of all, Dasy EasyEarn like Elastiq is capital guaranteed as it is protected under the Policy Owners’ Protection Scheme, administered by the SDIC. Compared to Elastiq, there is no lock-in period which I really like about it. I am going to emphasise again as we cannot predict the future when we are going to utilise the emergency fund.
If given a choice, I will pick Dash EasyEarn over Elastiq even though it charges $0.70 per withdrawal to my bank account via PayNow. As we will be parking our emergency fund in this plan, I do not foresee the need to withdraw regularly to our bank accounts and would rather get charged this fee than to feel uncertain when do I need to withdraw this fund during the three months of lock up in Elastiq.
Furthermore, I do not mind mixing some of my day-to-day-expenses fund with my emergency fund in Dash EasyEarn as I can withdraw a minimum $100, in multiples of $100 every month to my virtual Dash Visa Card for contactless payment.
Therefore, I decided to rank Singtel Dash EasyEarn as the third best savings product to consider as an alternative to bank savings accounts.
GIGANTIQ is an insurance savings plan by Etiqa Insurance that is open to eligible TiqConnect users to earn higher returns while enjoying the flexibility of anytime top-ups, withdrawals with no lock-in period of penalty. GIGANTIQ also offers insurance coverage in the event of death.
GIGANTIQ allows you to earn 2% per annum, up to first $10k, for the first year where the guaranteed interest rate is 1% per annum with additional 1% p.a as bonus for the first policy year. Returns are calculated daily based on the crediting rate of 2% for the first year and returns will only be credited at the end of each calendar month if the average daily account value is equal or more than $50 for the policy month. The maximum aggregate amount for all top-up is $200k less the single premium paid, all partial withdrawals and transaction fees. Furthermore, the policy will be deactivated immediately and account value be refunded if the average daily account value falls below $50.
GIGANTIQ allows you to earn 2% p.a for the first year, where the guaranteed interest rate is 1% p.a with additional 1% p.a as bonus for the first policy year. The 2% per annum return for the first year is applicable for the first $10k. The interest for any amount excess of $10k will be 1%. Returns are calculated daily and will only be credited at the end of each calendar month. The policy will be deactivated immediately and account value be refunded if the average daily account value falls below $50. The minimum sum to open GIGANTIQ is $50, with multiples of $1. The maximum aggregate amount for all top-up is $200k less the single premium paid, all partial withdrawals and transaction fees.
Single premium and all top up is payable through Direct Debit – POSB or DBS account or the cashable credits in existing Etiqa eWallet. Customers may choose to make payment via their own or third party POSB or DBS account.
Similar to Dash EasyEarn, GIGANTIQ does not have any lock-up period. One can partial withdrawal any amount from their plan anytime. For every partial withdrawal, there will be a transaction fee of $0.70 or $0.50 will be charged via PayNow or Direct Credit – POSB or DBS account respectively. There is no minimum amount to withdraw, however, one should note that if the account value falls below $50, the policy will automatically be deactivated.
Besides being functioned as an alternative to high yield savings accounts, GIGANTIQ has a death benefit of 105% of Account Value. Once this payment has been made, the policy ends.
My thoughts: Similar to Dash EasyEarn, GIGANTIQ is capital guaranteed as it is protected under the Policy Owners’ Protection Scheme, administered by the SDIC. For GIGANTIQ, there is no lock-in period which I really like about it. I am going to emphasise again as we cannot predict the future when we are going to utilise the emergency fund.
As both GIGANTIQ and Dash EasyEarn are similar in nature, given a choice, I will prioritise GIGANTIQ over Dash EasyEarn as it provides 2% for $10k for the first year. On the other hand, Dash EasyEarn is only offering 1.8% for $20k for the first year. The downside of both products is that it charges a transaction fee for partial withdrawal. Dash EasyEarn charges $0.70 per withdrawal for credit of funds to a bank account via PayNow. Although it is similar to GIGANTIQ, it offers another option to credit funds using Direct Credit – POSB or DBS account, in which it only charges $0.50 per withdrawal.
If one intends to park their emergency fund in either GIGANTIQ or Dash EasyEarn, I think it is fine to be incurred transaction fee provided that one does not make frequent partial withdrawals. With that being said, if one would like to save their day-to-day expenses fund in a higher yield savings products, they can consider Singlife which I will be sharing in a later bit.
With that being said, I decided to rank GIGANTIQ as the second best savings product to consider as an alternative to bank savings accounts.
Singlife Account is an insurance savings plan that credits interest and offers flexibility to make top ups and withdrawals with no lock-in and charges. The Singlife Account also provides insurance coverage to policyholders in the event of death and terminal illness. You will also receive a Singlife Visa Debit Card for any contactless payment where you can use it overseas too.
Singlife is the only insurance savings plan where its returns aren’t guaranteed. For the first $10000, you will get 2% per annum (from 1 November 2020) and for the next $90000, you will get 1% per annum. You will not receive any returns for the next $100000. The effective interest rate for $100k is 1.1%. Returns are calculated daily and credited to your account on the first day of the following policy month. The initial sum to activate the policy is $500 via FAST transfer. Thereafter the activation, you can start earning so long your account balance is above the minimum account value of $100.
Out of all insurance savings plans discussed in this post, Singlife is the most flexible in terms of withdrawal. It does not have any lock up period like the ones from Elastiq. Singlife accepts a minimum withdrawal of $1 to your designated bank account without any fees like the ones from Dash EasyEarn. Withdrawal is done using FAST and funds are credited almost instantly.
In addition, you get a complimentary Singlife Visa Debit Card where you can make contactless payment and even overseas transactions. For overseas transactions, you can choose to pay in foreign currencies, in which Singlife Visa Debit Card offers Visa’s competitive exchange rate with no FX fees or charges. You can also choose to pay in SGD for overseas transactions. Transactions will be converted to SGD via dynamic currency conversion, offered at selected merchants or websites.
Besides being functioned as an alternative to high yield savings accounts, Singlife provides life insurance coverage of up to 105% of Singlife Account Value and retrenchment benefits. One is eligible for retrenchment benefits for a period of three months, up to a total payout of S$10,000, provided you have been retrenched and remain unemployed for at least four months following the date of retrenchment.
My thoughts: The decision of ranking Singlife the top best savings product as an alternative to bank savings accounts is an easy one. I have been using Singlife for close to 6 months and I have no complain about it. It is really the alternative product to consider for a higher-yield savings account in this low interest rate environment.
How do I stash my cash?
As mentioned in my 1 Year NSF Milestone Finance Report Card post, I have been using CIMB’s FastSaver since 2016 and only last year when I moved all my monies to Standard Chartered’s Jumpstart account when it offered twice the interest compared to CIMB’s FastSaver. Since the introduction of Singlife early this year, I have max out the Singlife account to earn 2% per annum and I still have a significant amount of monies in Jumpstart.
Depending on individual needs, even after writing this post, I will not move the remaining monies in Jumpstart to the alternative products discussed. This is because the monies in Jumpstart is the capital for Investments. Therefore, I prefer to have the liquidity of what a bank can offer which the other alternative products can’t. If all my capital for Investment has been fully deployed, then will I consider Singtel’s Dash EasyEarn or GIGANTIQ.
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