Managing money in Singapore is often about finding the right balance between safety, returns, and flexibility. While investing in stocks, funds, or property may sound appealing, many Singaporeans still prefer low-risk, guaranteed-return instruments like fixed deposits (FDs) and Singapore Savings Bonds (SSBs).
But here’s the question: when does it make sense to park your money in a fixed deposit instead of buying SSBs? The answer depends on your goals, your time horizon, and how much flexibility you want with your cash.
Let’s break it down in a clear and practical way, so you can decide which option suits your situation better.
The Basics: What Are Fixed Deposits and SSBs?
Fixed Deposits (FDs)
A fixed deposit is a savings product offered by banks where you “lock in” a sum of money for a specific period—ranging from a few months to a few years—in exchange for a guaranteed interest rate.
- Lock-in period: Anywhere from 1 month to 3 years (sometimes longer).
- Returns: A fixed rate agreed upon at the start, typically higher than a normal savings account.
- Risk: Very low, since deposits are insured by the Singapore Deposit Insurance Corporation (up to S$100,000 per depositor per bank).
- Flexibility: You can’t withdraw early without penalties (often losing all interest).
Singapore Savings Bonds (SSBs)
SSBs are government-issued bonds designed for individual investors who want a safe, flexible way to grow their savings.
- Tenure: Up to 10 years, but you can redeem anytime with one month’s notice.
- Returns: Step-up interest structure—the longer you hold, the higher the average return. For example, the first year may pay around 3%, but by the 10th year, the average annual return could be higher (around 3–3.5% depending on prevailing rates).
- Risk: Virtually risk-free, as they’re backed by the Singapore Government.
- Flexibility: Can withdraw at any time with minimal penalty (just lose accrued interest for that month).
At first glance, both seem “safe and steady”—but the devil is in the details.
Comparing the Two: Fixed Deposits vs SSBs
Let’s line them up side by side.
| Factor | Fixed Deposits | Singapore Savings Bonds |
|---|---|---|
| Interest rates | Fixed upfront; often 2.5–3.5% p.a. (promos can go higher) | Step-up structure; 10-year average 3–3.5% p.a. |
| Tenure | 1 month to 3 years | Up to 10 years, flexible redemption |
| Liquidity | Locked in; early withdrawal = lose interest | Redeem any month (small fee) |
| Risk | Insured up to S$100,000 per bank | Backed by the Singapore Government |
| Best for | Short-term savings, cash you won’t touch | Long-term, passive saving and compounding |
So, when do you pick one over the other?
When Fixed Deposits Make More Sense
Fixed deposits may seem “old school”, but they shine in certain situations:
1. Short-Term Goals (6–24 months)
If you know you’ll need the money soon—for example, to pay for a wedding, a renovation, or a holiday—FDs are a good fit.
Example:
You’re a 28-year-old professional saving S$20,000 for your BTO downpayment in 18 months. Locking this into a 12- or 18-month FD at 3.3% p.a. ensures your funds grow steadily without risk.
With SSBs, the average return in the first year is usually lower. An FD gives you better short-term certainty.
2. Promotional Rates from Banks
Singapore banks often run special FD promotions, especially during periods of rising interest rates. These promos can sometimes beat the effective return of SSBs in the first 1–2 years.
Example:
Bank A offers a 12-month FD at 3.6% p.a. Meanwhile, the current year-one SSB return is only 3.0%. If you’re only planning to park cash for a year, the FD is clearly the better deal.
3. Guaranteed Returns with No Waiting
With FDs, what you see is what you get. If you lock in 3.5% for 12 months, you know exactly what you’ll earn.
By contrast, SSBs start lower and only reward you if you stay invested for the long term. That means if you only hold an SSB for a year or two, your effective return may be less attractive.
4. You Don’t Want to Deal with Applications
Applying for SSBs involves using cash or CPFIS via ATMs or internet banking and waiting for allotments (since demand can sometimes exceed supply). Fixed deposits are far simpler—you can apply instantly with your bank and secure the rate.
When SSBs May Be the Better Choice
Of course, fixed deposits aren’t always the winner. SSBs are great for those who:
1. Want Long-Term, Low-Maintenance Savings
If you’re building wealth steadily and don’t need access to the money for many years, SSBs are ideal.
Example:
You’re 35, planning to set aside S$50,000 for future retirement. By holding an SSB for the full 10 years, you lock in an average annual return of ~3.2%, with the flexibility to redeem anytime.
2. Value Flexibility
With SSBs, you’re not punished for early redemption. Need your cash in Year 3? Just redeem and get your capital back (plus interest earned).
FDs, on the other hand, are strictly locked in. Breaking them early usually wipes out your interest gains.
3. Diversify Safely
SSBs let you spread your money across different months’ issuances, staggering maturities and building a laddered portfolio. This gives you flexibility while maintaining government-guaranteed safety.
FDs don’t have the same flexibility—you commit to one bank’s rate and tenure.
4. Inflation Hedge in the Long Run
Since SSBs are linked to Singapore Government Securities (SGS) yields, their rates move broadly with inflation and market interest rates. Over time, this helps protect your money’s real value.
FDs, on the other hand, may not keep up with inflation if rates drop.
Practical Scenarios: FD vs SSB
Sometimes it helps to see how this plays out in real life.
Scenario 1: The Holiday Saver
- Profile: 25-year-old planning a S$10,000 Europe trip in 18 months.
- Best Option: Fixed Deposit.
Why? Short horizon, guaranteed return, higher rate than first-year SSB.
Scenario 2: The BTO Planner
- Profile: Couple saving S$60,000 for a flat in 2 years.
- Best Option: Fixed Deposit.
Why? They need the money within a strict timeframe. FD gives higher certainty and no redemption process hassle.
Scenario 3: The Retirement Builder
- Profile: 35-year-old professional with S$50,000 extra cash, no plans to use it soon.
- Best Option: SSB.
Why? Longer horizon, steady returns, and redemption flexibility.
Scenario 4: The Safety Net
- Profile: Family wants to keep S$20,000 aside as emergency funds.
- Best Option: SSB.
Why? Can redeem anytime without losing all interest. FDs would lock the money away, making emergencies harder to deal with.
So, Which Should You Choose?
The choice between fixed deposits and Singapore Savings Bonds isn’t about which is “better overall”—it’s about which fits your financial goals and time horizon.
- Pick Fixed Deposits if:
- You need the money in 6–24 months.
- You’re chasing promotional rates.
- You want guaranteed short-term returns.
- Pick SSBs if:
- You’re saving for the long term (5–10 years).
- You value flexibility and easy redemption.
- You want inflation-linked, government-backed safety.
Final Thoughts
Both FDs and SSBs serve a purpose in a smart money plan. FDs give you certainty in the short run, while SSBs help you quietly build wealth in the background over the long run.
Instead of thinking “either/or”, many Singaporeans use both:
- FDs for short-term goals and promos.
- SSBs for long-term, hands-off saving.
At the end of the day, the best choice depends on what you’re saving for, when you’ll need the money, and how much flexibility you want. The good news? In Singapore, both options are safe, reliable, and effective ways to grow your money—without losing sleep.