Wednesday, September 28, 2016

When Are Fixed Deposits Better Than Singapore Savings Bonds?

(Singsaver.com.sg, Singapore's leading personal finance comparison platform, provides free and easily accessible resources such as its up-to-date credit card product page and the latest personal loan packages available in real-time.)

More Singaporeans are moving away from Singapore Savings Bonds and back to fixed deposits. But is this the smartest thing to do? For most of 2015, Singapore Savings Bonds (SSBs) were considered the ultimate in savings products. Some even predicted they might fully replace fixed deposits in banks, due to their higher interest rates and greater flexibility. In 2016, however, some Singaporeans have started to drift back to fixed deposits. We examine why:
 
Singapore Savings Bonds versus Fixed Deposits
Singapore Savings Bonds (SSBs) offer an interest rate based on Singapore Government Securities (SGS). This is typically projected at between two and three per cent per annum. In order to get the full interest rate, SSBs must be held to maturity* (10 years). However, you can cash out on any month, although this will mean getting a smaller amount of interest. (*The coupon, or interest payment on a SSB, is variable. It steps up every year for which the bond is held. However, the payout upon maturity matches what you would earn from holding a SGS, for the same 10 year period). Fixed deposits generally have interest rates of below one per cent. However, many banks have recently launched promotions, with some offering rates of 1.2 per cent per annum or higher. Unlike SSBs, fixed deposits require the money to be committed. If you withdraw the money before the deposit matures, you will typically lose all the accrued interest. In theory, SSBs are almost always better than fixed deposits. Not only is the interest rate higher, you also have the option of taking the money out (without losing accrued interest) when you need it. Another attractive feature was the low minimum amount to buy SSBs. It only costs S$500, whereas the lowest qualifying amount for a fixed deposit is at least S$1,000.
 
However, Things Aren’t Looking Good for SSBs Lately
Due to wider economic conditions, the rate on SGS has fallen. If you were to purchase SSBs this coming October, the effective return per year (if held to maturity) is about 1.79 per cent (not the two to three per cent that was predicted in better times). To be clear, this is still a much higher interest rate than bank fixed deposits. The critical issue is what happens when you try to cash out early. Say, for example, you put your savings of S$10,000 in SSBs and then withdraw them three years later. At the current rate, you would get around S$10,301. This is effectively a return of one per cent per annum. By comparison, say you put the same savings with a bank fixed deposit, with an interest rate of 1.2 per cent per annum (this rate for fixed deposits is possible at the time of writing – be sure to compare different bank account options to find the best rate). Assume it is a deposit that matures in three years. At that point, the payout would be around S$10,360. Of course, the S$59 in this example may not seem like much. But if you are storing your life savings, larger amounts will mean commensurately larger differences in the amount of interest earned.
 
When Should You Get Fixed Deposits Instead of SSBs?
Assuming you buy SSBs this October, the effective return per annum would be one per cent if you hold it for three years, and 1.19 per cent if you hold it for four years. As some banks have fixed deposits that pay out 1.2 per cent or more for the same time period, the fixed deposits are better if you are expecting to tap your savings then. For example, if you are 25 years old and in a committed relationship, you may need to tap your savings in three to four years to get married. If so, you could derive higher returns from putting your cash in a fixed deposit. That said, SSBs will still beat fixed deposits as a long-term product, even with yields falling. And of course, SGS rates will not be low forever, so this entire situation may be different when we revisit SSBs next year or beyond.

Saturday, September 24, 2016

Which Online Grocery In Singapore delivers The Biggest Savings?


(Singsaver.com.sg, Singapore's leading personal finance comparison platform, provides free and easily accessible resources such as its up-to-date credit card product page and the latest personal loan packages available in real-time.)
We compare baskets between RedMart, Honestbee, Kenny Grocery, FairPrice, Cold Storage, Sheng Siong, and Giant. Which online grocery is the cheapest? You might agree that grocery shopping is one of life’s necessary evils. Like scrubbing the bathtub, doing the laundry and having dinner with the in-laws, it’s essential but rarely fun. Thankfully, we live in an age when we can now eschew the chore of queuing endlessly at the supermarket once and for all. With just a few clicks and your trusty credit card by your side, you can have your day-to-day items sent to your door. And with the sudden proliferation of online grocers in Singapore, the stiffening competition in the sector means these vendors can offer free or even same-day delivery — making your life that much more convenient. So, armed with a short list of 10 daily essentials, we loaded up our virtual shopping carts with the same items at six of the most well-known online supermarkets to see what the differences would be — and came away quite surprised at the potential price gaps. Witness the savings free delivery can mean to a simple grocery order:
 
 
RedMart
Cold Storage
Fairprice
Kenny Grocery
All For You by Sheng Siong
Giant
Thai fragrant rice – 5kg
S$14.55
S$14.50
S$13.95
S$15.30
S$14.80
S$15.50
Eggs 10s (cheapest available)
S$1.85
S$2.30
S$1.60
S$2.90
S$1.55
S$1.80
White bread loaf – 400g
S$2.00
S$2.00
S$2.00
S$2.00
S$2.00
S$2.00
Vegetable oil – 2L
S$3.95
S$6.64
S$4.80
S$6.30
S$3.90
S$4.95
Kai lan – 300g
S$2.00
S$3.95
S$1.55
S$2.00
S$1.90
S$1.40
Kikkoman Premium soya sauce – 600ml
S$4.65
S$4.90
S$4.65
S$4.65
S$4.65
S$4.65
Coke Light, 4 cans
S$3.40
S$3.20
S$3.20
S$3.20
S$3.20
S$3.40
Dove Daily Shine shampoo
S$11.50
S$11.70
S$11.50
S$8.90
S$11.70
S$11.70
Kleenex 20s toilet roll
S$13
S$13.45
S$13.80
S$14.45
S$14.45
S$14.45
Dishwashing liquid refill (cheapest)
S$1.50
S$1.60
S$1.50
S$1.55
S$1.55
S$1.55
Subtotal
S$59.85
S$64.25
S$58.55
S$61.25
S$59.50
S$61.40
Delivery
S$0
S$7
S$10.70
S$0
S$7

Friday, September 23, 2016

Why Brand Loyalty Makes Singaporeans Spend More Money



Being brand loyal is rewarding – or so you think. Because of several cognitive biases, brand loyalty actually makes Singaporeans spend more. Knowing how to save money and spend wisely is well and good, but what really drives our money habits? Why do we Singaporeans spend as we do? In our new Money Mastery series, we take a look at the psychological workings behind the scenes that govern your relationship with money. Being brand loyal is rewarding. You get special invites, exclusive gifts, dibs on the latest announcements, motivation to scream at complete strangers over the Internet – all for the privilege to spend more money than anyone else. In today’s confusing world, it’s more taxing to choose between the brands and packages that come flying our way. Better to choose a particular brand, stick to it, and it’s apples all the way, right? After all, we’re rational creatures, and every choice we make is a carefully considered one, crafted with the cold steel of our clearly superior intellect. It follows, then, that there are good reasons for aligning ourselves with a particular brand, and everyone else is an idiot. Well, not quite. The truth is, we prefer the things we own not because of any demonstrable superiority over the other choices, but because we defend our past choices to protect our sense of self. Here’s how brand loyalty actually makes you spend more.
  
Brand Loyalty Hijacks Your Experience
In a fascinating experiment conducted by Baylor University, Texas, participants were divided according to their professed preference for either Pepsi or Coke. They were then given unmarked samples or either Coke or Pepsi to drink, while hooked up to an MRI machine. The participants showed a clear preference for Pepsi (blasphemy!), as evidenced by pleasure centre activity showing in their brain scans. But when Coke fanboys were given Pepsi again – and this time, knew they were drinking Pepsi – their brain scans actually showed reduced pleasure signals. And, in contrast with their brain scans the first time round, they reported that they enjoyed Coke more than Pepsi. What happened? Being brand loyal had altered their sensation of the product, turning an objective experience (sensation of taste) into a subjective assessment (preference for the inferior product). The next time you’re tempted to proclaim how the iPhone 7’s lack of headphone jack is the superior option – even though it will cost you more in terms of convenience and money – ask yourself if it’s not brand loyalty hijacking your experience.
 
 
How Brands Get You Hooked
You may think that it’s the brand that’s working hard to keep your loyalty. After all, we’re at liberty to take our business elsewhere, anytime we want, right? However, it is our own cognitive biases that keep us on the hook. Take the Endowment Effect for example, where we think the stuff we own has higher value simply because we own it. Researchers found that people who get free items – say, a bottle of water – tended to want more money in compensation for selling that item. In contrast, if given the choice to buy that exact same item, they wanted to pay less money. And then, there’s Choice Supportive Bias, a major confirmation bias that triggers every time we purchase something. Choice Supportive Bias works like this: to reduce the inherent anxiety that comes from making a choice (and the more expensive the choice, the higher the anxiety), we make justifications after the fact to explain why our chosen option is the best one. Taken together, it’s easy to see why being a fanboy (or girl) has become the cultural norm in our world of rich and diverse consumer goods. All a corporation has to do is to create an association with their products or services that we identify with. Once we’ve bought into it (i.e., become branded), our cognitive biases kick in and keep us engaged.
 
What is Your Brand Loyalty Costing You?
Brand loyalty is such an insidious force that we fail to notice the price we are really paying. Take for example, Apple, which has built up brand loyalty to such an impressive degree that it can get away with things other companies wouldn’t dare dream of. Remember the good old days when we could swap out depleted mobile phone batteries for fresh new ones? Apple came along with the iPhone and took that away, to nary a peep from the famously vocal tech industry. Now, Samsung has followed suit with its latest iteration – the Note 7’s battery is non-removable, arguably contributing to the PR and logistical nightmare of resolving its current “exploding phone” image. Take another recent craze – Taiwanese milk tea. The one which prompted that one Tampines guy to go on a hoarding spree, inspiring much virtual hate in the process. Fans of Cun Cui He milk tea thought nothing of getting up in the wee hours and paying $2.80 per bottle when it debuted at local 7-11 stores, never mind the fact that these sell for about $1.20 in Taiwan. Enterprising Singaporeans even started re-selling their haul, at the totally reasonable price of $4 per pop. Or maybe you prefer your cuppa freshly brewed. If you’re a Starbucks regular, you’d surely have noticed how the prices of your favourite drink have crept up over the years. But it doesn’t bother you as much as it rightly should. An expert at value-based pricing, Starbucks shrewdly hikes up prices in a way that ensure their core demographic – higher-income coffee drinkers who see the beverages as an affordable luxury – remain pliant and accepting of ever-increasing prices. There’s no doubt that being a fanboy is fun. You get to obsess over every little detail, trade gossip, gobble up every piece of news, defend every criticism, snigger at scathing memes and categorise your friends. Keep in mind that brand loyalty is a self-created, self-sustaining phenomena that have very little do with our chosen brands. In fact, corporations couldn’t care less the heights to which you take your brand loyalty – as long as you keep buying the shinier, more expensive offering at release, right on schedule. Next time you feel shivers creeping down your spine at the sound of the next keynote playing, it’s a good time to remember that brand loyalty costs you more than it gets you.
 
(Singsaver.com.sg, Singapore's leading personal finance comparison platform, provides free and easily accessible resources such as its up-to-date credit card product page and the latest personal loan packages available in real-time.)

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