So far, I’ve been putting it in these few places:
2) Normal savings bank account (not the hurdled type)
3) Singapore savings bond (SSB)
This is my allocation to my warchest. It doesn’t include emergency funds:
1) MMF – 30%
2) Bank accounts – 35%
3) SSB – 35%
I keep some liquid cash in normal bank accounts for day to day use and the bulk of the money under the bank accounts is parked in the CIMB fastsaver account. The good thing about that account is that for the first 50k, there will be a 1% interest pa (thereafter is 0.60% pa), fuss-free. There’s no hurdles to jump and no credit card spending to clock. I know many people have the hurdled savings accounts with much higher interest, like about 1.8% pa, if they satisfied certain criteria like credit card spending and salary. Since I’m self employed, I don’t qualify for the salary part, hence it’s such a hassle to jump over all the hoops to reach that the high interest, only to see it fall away when the hoops are raised even higher.
Savings bond (SSB) is always a good place to store cash because recent issues has been giving 2% for 1 to 3 yrs, but it is slightly less liquid. MMF takes about 2 working days to cash out, while the cash in banks is immediate. SSB takes a maximum of 1 month, but if you actually apply to cash out towards the end of the month, you really just need 1 week to get the cash out. Hence, it’s also a timing issue.
What about MMF? Below is the raw data for the tracking of the MMF unit price:
The compounded interest rate for the years are shown below:
2016: 0.868 % pa
2017: 0.818 % pa
2018: 1.117 % pa
You can see that the interest rate is creeping up for poems MMF recently. This is of course far from its heyday about 10 yrs ago:
2007: 2.01% pa
2008: 1.33% pa
2009: 1.04% pa
As you probably already know, the interest rates had been creeping up from the start of 2018 till now. It’s still increasing, but at a slower pace now compared to the start of 2018. Hence, in order to forecast how the MMF’s rates is going to be like going forward in 2019, we should look at the latest quarterly rise in the unit price in 2018 to get a gauge. It’s 1.231 % pa so I think we can expect the MMF’s rate to be around this in 2019. In fact, I expect it to be more than 1.2%.
That means it’s better than the interest given by the CIMB fast saver account. Well, slightly better with some caveat. There is FDIC deposit insurance for cash parked in banks. For mmf, I don’t think there’s any. But it’s been a pretty safe MMF with nary a drop in unit price since I’ve been tracking it in 2006. I think the more important thing is about the cap for the 1% interest rate in CIMB. That’s only for first 50k, whereas for MMF, there is no cap whatsoever.
I need to rejig my current set up. With a kid in tow, I need more emergency cash. And I will need to park them in a place I can’t touch easily. The best place right now is SSB. I will also be parking more money into poems MMF since it has higher interest than my bank accounts, doesn’t have a cap and makes it easy for me to buy equities (MMF account is linked to shares account). Yet, I also can’t keep pumping money into MMF, because what if the MMF goes kaput? There’s no insurance for me. So maybe a self imposed cap of 50k in MMF is what I’ll do, coupled with a cap of 50k for cimb fast saver account and another self imposed cap of 50k in SSB. Fill up MMF first, then fill up fastsaver, then fill up SSB, in that order.
That totals…150k. I don’t even have that much cash right now, but at least this exercise makes me think of the hard and soft limit that will be staying with me for the next 3 to 5 yrs I guess.