We all know that stashing your savings away in a run-of-the-mill POSB savings account is a waste due to dismal interest rates. But even so-called high interest savings accounts (UOB One, DBS Multiplier and OCBC 360) aren’t looking so hot these days.
Thanks to the state of the economy, banks have gone on a slashing spree of their interest rates this year. Plus you usually have to spend more — which kind of defeats the whole point of saving — and insure or invest through the bank to unlock higher bonus interest rates.
What alternatives do we have then? Singapore Savings Bonds (SSB) used to be a safe bet to grow your cash as well but this month’s (Sep 2020) has fallen to a low of 0.9% for 10 years. You can also consider fixed deposits, although rates have also dropped and your deposit is locked up for a good 12 – 24 months.
So instead of letting your cash languish in a bank account, you might want to try growing it through a cash management account.
Account comparison: Stashaway vs FSMOne vs Phillip Securities vs MoneyOwl vs Endowus
|Cash Management Accounts|
|Account||Minimum initial deposit||Minimum balance||Projected interest rate|
|Stashaway Simple||–||–||1.4% p.a.|
|Endowus Cash Smart
Endowus Cash Smart Enhanced
|$10,000||–||Core: 0.9% p.a. to 1.1% p.a.
Enhanced: 1.7% p.a. to 2.0% p.a.
|FSMOne Auto-Sweep Account||$50||–||0.759% p.a.|
|MoneyOwl WiseSaver||$100||–||0.56% p.a.|
|Phillip Smart Park, POEMS||$500||$100||0.814% p.a.|
*Please note that rates change and are not guaranteed. As of September 2020, the above rates were offered by these companies as reliable estimates of returns.
What are Cash Management Accounts and how do they work?
A cash management account is an alternative to a regular checking or savings account, usually offered by non-bank companies. You can store your cash in these accounts and withdraw it whenever you like.
The main advantage of cash management accounts is that they tend to offer attractive interest rates compared to bank accounts and more importantly, being relatively fuss free — that is, you do not have to spend X amount on your credit card or take an investment or insurance policy with the bank just to hit a higher interest rate.
The interest rates of cash management accounts are obtained from investing money in portfolios that can grow it at a decent rate.
Other than better interest rates, another advantage of parking your money in a cash management account rather than a high interest savings account is that there are fewer restrictions on withdrawals. With the latter, your interest rate can suffer if you make withdrawals and your bank account balance falls below a certain amount.
Cash management accounts can come with a level of risk, but this is typically quite low. Even if you lose money, this is likely to be a tiny percentage, and your chances of having your savings completely wiped out are negligible. StashAway Simple’s risk index, for example, indicates that you have a 99% chance of not losing more than 1.7% of your money in a year.
Let’s take a closer look at each of them and what they offer.
StashAway is a well-known robo advisor in Singapore that offers automated investments. The StashAway Simple cash management portfolio invests your cash in unit trusts. There is no minimum deposit or minimum balance, so you’re free to put as much or as little as you want into the account.
Stashaway Simple grows your money through two funds: LionGlobal SGD Money Market Fund (MMF) and LionGlobal SGD Enhanced Liquidity Fund (ELF), splitting their assets 50-50 between the two.
While StashAway does not charge management fees, the unit trust managers’ charge will be factored into your projected returns.
Right now, StashAway Simple has a projected rate of 1.4% per annum. There is no minimum lock-up period, so you can withdraw your cash at any time. That being said, a withdrawal takes about 3 to 4 days, so you don’t want to rely on your StashAway Simple account for day-to-day spending.
You also have the option of opening 2 StashAway Simple portfolios, one that you can fund using your SRS (Supplementary Retirement Scheme).
Endowus Cash Smart Core
Endowus is yet another robo investor that also has a cash management account, in the incarnation of Cash Smart.
There are two types of Endowus Cash Smart accounts on offer: Cash Smart Core and Cash Smart Enhanced. Cash Smart Core offers projected returns of 0.9% to 1.1% per annum vs Cash Smart Enhanced projected rates of 1.7% to 2% per annum.
So, we can clearly see that Cash Smart Core is the lower risk, lower return option. Half of Cash Smart Core funds are invested in the Fullerton SGD Cash Fund, and the other half in LionGlobal SGD Enhanced Liquidity Fund.
The actual projected returns are 1.2% to 1.4%, but you need to subtract the 0.18% fee on the fund managers’ side as well as Endowus’s access fee of 0.05% per year better getting your returns, projected at 0.9% to 1.1%.
Cash Smart Enhanced invests a bit more aggressively, with 50% of funds in UOB United SGD Fund and 50% in LionGlobal SGD Enhanced Liquidity Fund. Projected returns are 2% to 2.3%, but after subtracting fund-level fees of 0.3% and Endowus’s access fee of 0.05%, we get projected returns of 1.7% to 2%.
The biggest deterrent for many would be the high minimum initial investment of $10,000. However, there is no minimum balance, so you can withdraw your cash if you need it and each transaction has to be at least $100.
Note that you have to allow 6 business days for withdrawals. You can also use your SRS to invest if you don’t want to use your cash.
FSMOne Auto-Sweep Account
An online trading platform and brokerage owned by Fundsupermarket, the FSMOne Auto-Sweep sounds like a new form of Toto, but it’s really a cash management account. Its name comes from the fact that you can automate the transfer of all your spare cash (eg. dividends, sales proceeds) from your FSM brokerage account into your Auto-Sweep account so it gets to earn interest.
Plus you can also use the funds in your Auto-Sweep Account to invest in unit trusts, bonds, stocks and ETFs.
The portfolio consists of 45% investments in LionGlobal SGD Enhanced Liquidity Fund, 40% in Fullerton SGD Cash Fund A and 15% in Cash Account, so it’s spread out.
Its latest net yield as of September 2020 was 0.759% p.a.. This sum is derived after deducting management fees of 0.05% per quarter and fund-related fees.
There is no minimum account balance and the minimum deposit is only $50. You do have to ensure there is a monthly recurring top up of at least $100. Plus you can withdraw your cash (minimum $50) within one business day if you make your redemption by 3pm, making it the fastest management account on this list in terms of withdrawal.
MoneyOwl is an NTUC Social Enterprise and investment platform and it also offers a cash management account called WiseSaver with an interest rate of 0.56% p.a. at the time of writing.
WiseSaver invests all of your money in the Fullerton SGD Cash Fund, which is considered very safe as it’s owned by Temasek.
As MoneyOwl aims to be accessible to the public, WiseSaver’s barriers to entry are not high. Their minimum initial deposit is only $100, or if you commit to a monthly regular savings plan, just $50 a month, and you can fund it using both cash and from your SRS. Withdrawal takes 2 o 3 business days, which is pretty fast in the world of cash management accounts.
The only fee being charged is a fund-level fee of 0.15% per annum, which is paid to Fullerton Fund Management. This is worked into the price of the unit.
Phillip SMART Park, POEMS
Phillips Securities’ POEMS brokerage is one of Singapore’s most well-known. They’ve got their own version of a cash management account called SMART Park. It’s designed to park idle cash, such as dividends from your stockholdings that haven’t been reinvested.
SMART Park invests in Phillip Money Market Fund for SGD, and Phillip US Dollar Money Market Fund A for USD. These Money market funds contain government and corporate bonds, commercial bills and fixed deposits, which are pretty stable, so you’ve got nothing to worry about.
You can also use your funds from SMART Park to purchase investment products via POEMS should you wish to do so.
The minimum initial deposit is $500, and you’ll subsequently have to ensure you maintain at least $100 in the account if you want to continue receiving returns. Withdrawals are super fast — you can receive your cash by the next working day if you send your withdrawal request by 10am.
Do you think you’ll move your money into a cash management account? Tell us or why not in the comments!