Interest rates are Low. How Do you Get Higher Yields?

How to get higher yields when interest rates are low

Do any of these describe you?

▢ My children are going to school soon

▢ We’re going to upgrade to a new flat in 2-3 years’ time

▢ My parents are looking for somewhere to “park” their pension monies

If you’ve checked-off on one or more, you might be looking for somewhere safe to grow these cash in the meantime.

Thing is, in many parts of the world, yields on cash is only a bit above zero. That’s because of ultra-low interest rates. (If you hold on to cash, inflation will just whittle down its value and make it harder for you to earn it back with each passing day.)

Singapore is no exception. Here, the basic current and savings accounts have interest rates that are barely above zero. (Besides special bank-as-you-earn accounts such as the Multiplier Account.) Term deposits do a little better. But there is still a zero in front of most term deposit rates, except during special “promotions”.

And the pursuit of significantly higher returns will take you into riskier territory. How then can you get higher returns on your cash?

There are 3 things you can do.

  1. Invest in Singapore Savings Bonds (SSBs)

    A safer alternative is the Singapore Savings Bond, where returns generally match those of Singapore Government Securities that have an equivalent tenor. And they are guaranteed by the Singapore Government.

    And because the interest paid increases each year, the longer you hold SSBs, the higher the return.

    This can work well if you are diversifying your investments, saving for retirement – you can buy SSBs with your Supplementary Retirement Scheme (SRS) monies – or saving for a rainy day. Just log into your iBanking account
  2. Invest in Dividend-Paying Stocks

    This extends your options to shares, REITs, exchange-traded funds (ETFs) and unit trusts. It enters riskier territory, which means there is potential for loss of capital. But generally, the longer you hold good quality stocks, the lower the risk of a loss. And stocks that consistently pay dividends may provide some insulation, because you are paid income while you wait out market volatility.

    You can start investing with Vickers Online or through the Online Funds Investment Platform.
  3. Take up Short-Term Endowment Policies

    But if you need the funds within a few years, for example for a wedding, or a child’s tertiary education, you really want your cash to grow.

    Or you might have just received your pension pay-out, and are looking for a short-term place to “park” your money, while earning a better yield.

Short-term endowment policies are a way of getting nearer your financial goal.

Here’s how one such short-term endowment policy, SavvyEndowment, stacks up against longer-term endowment policies:

  Shorter-term endowment policies, e.g. SavvyEndowment Longer-term endowment policies
Amount required
  • One-off lump sum to get started
  • Annual premiums, sometimes for as long as the endowment policy lasts
Lock-in period
  • 2-3 years
  • 5, 10, or 15 years depending on the policy you choose
Returns
  • Guaranteed benefits from the insurer at the end of the policy’s term. You’ll get this whether or not the policy is classified as ‘participating’ or ‘non-participating’.
  • If you buy a participating endowment policy, you can share in the profits* that the insurer gets from investing the premiums collectively. This is referred to as a non-guaranteed* maturity bonus.
Death coverage
  • In the unfortunate event of death, your dependents would receive a death benefit payout.

    Note: This is not a major feature of the policy, as those seeking higher death benefits would typically be looking at other types of insurance.

    However, it does mean that in the unfortunate event of death, your beneficiaries would not lose out on your premium payment or wait for the policy to mature.

*Note: Non-guaranteed bonuses are not fixed. They are determined and declared on an annual basis.

SavvyEndowment works best if you’ve prioritised a goal over the excitement of investing in a risky proposition. When you've already visualized the house or wedding in a few years, you really need something that grows.

And it’s easy to get started. All you need to do is log into your iBanking account, or click here.

No need to dig around for a pen…that's because we don't need your signature. You also don't need to check your calendar for an appointment with a wealth planning manager.

The ease and speed of how this is done online also makes the entire process simpler, easier and more convenient for you.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

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