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A reader asked if it is better to put our emergency funds in Singapore Dollar fixed deposits or in Singapore Savings Bonds?
Read the very thoughtful comment from the reader: HERE.
This is my reply:
For the longest time, I favored fixed deposits over Singapore Savings Bonds for my emergency fund.This is largely because I am able to get my hands on the money immediately upon breaking a fixed deposit.
On the other hand, as you have rightly pointed out, we have to wait for a month before we can get our money in the case of Singapore Savings Bonds if we were to make early redemptions.
In an emergency, I probably need the money in a hurry.
Waiting a month before I could get the money might be a luxury I could not afford.
Even now, I am using the Singapore Savings Bond only as an alternative for money which I had planned to make voluntary contributions to my CPF account with.
10 years is relatively long term and mimics what the CPF does for me and at least for people who are 45 years old or older.
Why do I say this?
From an interest income perspective, the Singapore Savings Bond makes more sense now than voluntary contribution to our CPF accounts.
In using fixed deposits to store my emergency fund, I make sure that each fixed deposit is relatively small with sums of between $10K to $25K each.
This is because if I were to break a smaller fixed deposit, I would lose less interest income compared to breaking a larger fixed deposit.
It is a reason why fixed deposit promotions like the recent one from UOB which requires a minimum sum of $50K in fresh funds to qualify are not viable for my emergency fund.
This is only my belief, of course, which applies to my own circumstances and, maybe, eccentricities.
The following blog is probably most relevant to this discussion and you might want to read it if you have not done so before:
Here are more references:
Happy emergency fund building!
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SSBs, T-bills, Fed up!
SSBs, T-bills, Fed up!
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