StashAway Simple Cash Management Account Vs Regular Savings Accounts - What's the Difference?

This article is republished with permission from Dollars And Sense .

24-Jun    Share!

This article contains affiliate links. DollarsAndSense may receive a share of revenue from your sign-ups.

StashAway's cash management portfolio - StashAway Simple - enables retail investors to invest in money market funds. This tends to beat the interest rate offered by banks on our cash savings. With this, StashAway allows users to monitor more aspects of our financial lives within the StashAway robo advisory platform.

On its website, StashAway Simple projects a return of 1.3% per annum on any amount placed with them, without any lock-in periods or minimum balance. This looks higher than other no-frills, high-interest savings accounts and fixed deposits currently offered in Singapore.

Despite sharing several similarities with regular savings accounts from banks, there are some key differences between the two which are important to understand before signing up.

Read Also: Complete Guide To Cash Management Accounts In Singapore

#1 StashAway Simple Is Not A Savings Account

The first point we should understand is that StashAway Simple is a cash management account and not a savings account. Unlike a savings account where our money is deposited in a bank, our funds with StashAway Simple is equally allocated into the LionGlobal SGD Money Market Fund and LionGlobal SGD Enhanced Liquidity Fund.

The combination of these funds makes StashAway Simple riskier than a conventional savings account. Nevertheless, the risk we take on is significantly lower than growth-orientated investments.

StashAway Simple does have any sales charge or require any minimum balance. Furthermore, to boost investor returns, any rebates from management fees are credited back to account holders.

StashAway Simple is a low-risk investment. We cannot withdraw our money from an ATM, nor use it to pay our bills.

Read Also: Best Savings Accounts In Singapore - If You Don't Want To Keep Jumping Through Hoops

#2 StashAway Simple's Projected Rate VS Savings Account's Tiered Interest Rates

As explained earlier, StashAway Simple aims to deliver a projected net return of 1.3% per annum. While the structure of the projected net return is flat and easy to understand, this rate is not guaranteed and may fluctuate according to economic conditions.

Funds LionGlobal SGD Money Market Fund LionGlobalSGD Enhanced Liquidity Fund Average Percentage
Weighted yield to maturity 1.02% 1.49% 1.26%
Expenses - 0.30% - 0.32% - 0.31%
Rebates from Fund Manager + 0.138% + 0.138% + 0.138%
Projected Rate 0.858% 1.308% 1.083% p.a.

 

According to the latest factsheet and annual reports by the respective funds, and taking into account rebates from the fund manager, it looks like the returns are lower than the projected 1.3% return. This may be due to a lag effect in the numbers we are using. The weighted yield to maturity for the funds are taken from its April 2022 factsheet. It may be higher now, given the rising interest rate environment.

Interest rates of regular savings accounts offered by the banks are typically lower, although banks may revise their interest rates from time to time. In the case of some high-interest savings accounts, there are tiered interest rates that require customers to satisfy multiple criteria, such as crediting of salary, transacting using their credit cards and maintaining a monthly expenditure in the form of insurance or investments. This higher interest may seem attractive but is only practical for those who can hit the criteria specified by the bank each month.

We may also compare StashAway Simple’s returns to the Singapore Savings Bonds (SSB). Its projected 1.3% annual return is slightly lower than the 1.43% return paid by the SSB within the first year. This may also suggest that rates with StashAway Simple are likely to increase going forward.

Read Also: Best Savings Accounts for Working Adults in Singapore

#3 The Use of SRS Funds in StashAway Simple

Another difference that sets StashAway Simple apart from the conventional savings account is the flexibility of channelling our Supplementary Retirement Scheme (SRS) monies into it.

SRS plays a complementary role to one's CPF savings, and can also be used as a tool to enjoy tax relief. However, a typical SRS account with banks only provides an interest rate of 0.05% per annum on SRS savings.

Due to the low-interest rates, our SRS savings risk becoming eroded by inflation over time. The usual choice of many SRS account holders will be to invest the monies. But for those who would prefer to place their SRS funds into instruments with a higher yield while limiting exposure to high risk, StashAway Simple can be a good option.

Given the structure of StashAway Simple, there is no doubt that there are some risks involved. For those who want risk-free investments to grow their funds, they can consider other relatively liquid products such as fixed deposits or the Singapore Savings Bonds, where the interest on deposits is guaranteed by the banks or government.

Read Also: How Much Must You Earn (And Invest) For It To Make Financial Sense To Top Up Your Supplementary Retirement Scheme (SRS) Account This Year?

Investing With StashAway's Robo-Advisor Platform

If you wish to potentially earn more on your monies (by taking on slightly higher risk), you might want to look at StashAway's robo-advisor investment solution. For DollarsAndSense readers, StashAway is giving 50% off in management fees for 6 months, for up to $50,000 in portfolio value.

We will not be charged any management fee nor have any of our funds contribute to our AUM for the calculation of management fees for our StashAway Simple portfolio, and this exclusive offer is for its StashAway investment products.

Sign-up for free today at this link!

Read Also: Step-By-Step Guide To Opening An Account And Investing Through Singapore-Based Robo-Advisor StashAway

This article was first published on 22 January 2020 and been updated to include the latest information.

The post StashAway Simple Cash Management Account Vs Regular Savings Accounts – What's the Difference? appeared first on DollarsAndSense.sg.

Contributed By: Dollars And Sense