Fixed Deposits in Singapore | Investing in Fixed Deposits Singapore

Bank Accounts | Fixed Deposits
by Priyadarshini 12 May 2022

The fixed deposit account is the weird cousin that everyone easily forgets about at family reunions in the world of financial products. There are numerous misconceptions about what a fixed deposit account is. In this blog, we tell you about fixed deposits in Singapore

Some perceive it as a savings account from which you cannot withdraw funds, while others simply consider it as a bad investment. Here are some fundamentals to help you understand fixed deposit accounts and whether they are right for you.

Fixed Deposits in Singapore

What exactly is a fixed-deposit account?

A fixed deposit (sometimes known as a time deposit) account is a type of bank account that pays a predetermined rate of interest in exchange for depositing a specific amount of money for a specific length of time. But isn’t that how all bank accounts operate? Fixed deposit accounts vary from regular bank accounts in this regard.

You are locking up your money for a set length of time 

The shortest time period is one month. However, you would need to maintain your money in the account for a considerably longer amount of time to make it worthwhile. Most banks will give increasing levels of interest the longer you commit your money to the fixed deposit, up to a maximum tenor.

You agree on the amount to deposit ahead of time

Unlike a savings account, which allows you to deposit any amount whenever you want, a fixed deposit requires you to contract with the bank ahead of time to deposit a specific amount.

You can withdraw your money

Many people believe that their money is lost in the depths of the fixed deposit account until the deposit matures, but this is not the case. You are normally permitted to withdraw the money whenever you want, although this may result in you receiving no or little interest.

Why should you open a fixed deposit account?

Because of the low-interest rates, most consumers do not consider a fixed deposit account to be a smart investment. While greater than typical savings account interest rates, fixed deposits still offer below-inflation interest rates. That is not to mean that you should abandon fixed deposits as a component of your investment strategy right now.

Fixed Deposits in Singapore

Here are some reasons why you should register an account:

They are almost risk-free:

Unlike other types of investments, fixed deposits are almost risk-free. You will get your money back plus interest as long as the bank does not fail. You won’t have to worry about market swings because the interest rates are fixed. Even if the bank fails, your deposits are still insured for up to $50,000 by the Singapore Deposit Insurance Corporation.

A low-risk component is required in your portfolio:

It’s not a good idea to rely solely on fixed deposits for investment, but if you already have other investments and want to allocate some of your money to a lower-risk investment, a fixed deposit is one option.

You have a large sum of cash that you do not intend to spend or channel into other investments:

If you have a large sum of cash that you do not intend to spend or channel into other investments, putting it in a fixed deposit account will allow you to earn higher interest than if you leave it in a savings account.

You desire consistent cash flow:

Interest payments are made on a regular basis, usually quarterly or annually. Fixed deposits are quite liquid. You can withdraw your money whenever you want, but doing so may result in you receiving less interest or losing it entirely.

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