StashAway Simple Cash Management Account Vs Regular Savings Accounts – What's the Difference?
StashAway's cash management portfolio – StashAway Simple – enables retail investors to invest in money market funds to conquer the interest rate offered by banks on their cash savings. In providing such a service, StashAway allows users to monitor their cash holdings and investment portfolio, via the StashAway robo advisory tool, in one convenient, consolidated platform.
From 1 September 2021, StashAway Simple has revised its projected net go back to 1.4% per annum on anywhere placed with them, with no lock-in periods or minimum balance. This is greater than other no-frills, high-interest savings accounts and glued deposits currently offered in Singapore.
Before this, StashAway Simple continued to pay for 1.9% on funds placed with it, regardless of the underlying investments not being able to achieve such returns, by providing one more rebate.
Despite sharing several similarities with regular savings accounts from banks, there are some key differences between the two that are important to understand prior to signing up.
Read Also: Complete Guide To Cash Management Accounts In Singapore
#1 StashAway Simple Is Not A Savings Account
The first point you should understand about StashAway Simple is it is a cash management account and not a savings account.
Unlike a checking account where your hard earned money is deposited having a bank, your deposits with StashAway Simple is allocated equally into two funds – Money Market Fund (MMF) that is made up of short-term money market instruments, that has been enhanced Liquidity Fund (ELF) which consist of debt instruments.
The mixture of the funds makes StashAway Simple riskier than simply putting aside funds in a conventional bank account, although the risk is significantly lower than typical growth-orientated investment portfolio.
StashAway Simple doesn't come with any sales charge or require any minimum balance. Furthermore, to enhance investor returns, any rebates from management fees are credited back to customers in the form of projected net returns that is tied together with the returns of the two funds, less expenses.
On the other hand, you cannot withdraw funds in StashAway Simple from an ATM, nor utilize it to pay for your debts, issue a cheque based on funds from this, or other functions you come to expect out of your savings account.
#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 just one.4% per annum. While the structure from the projected net return is flat and easy to know, this rates are not guaranteed and could fluctuate according to economic conditions.
|Funds||LionGlobal SGD Money Market Fund||LionGlobalSGD Enhanced Liquidity Fund||Average Percentage|
|Weighted yield to maturity||1.10%||1.94%||1.52%|
|Expenses||– 0.39%||– 0.43%||– 0.41%|
|Rebates from Fund Manager||+ 0.125%||+ 0.125%||+ 0.125%|
|Projected Rate||0.835%||1.635%||1.235% p.a.|
According towards the latest factsheet and annual reports through the respective funds, and considering rebates from the fund manager, it appears as though the returns are lower than previously projected in September 2021. Given the trend of lowering interest rates using their company high yield savings account and our computed lower return for StashAway Simple, we may expect another round of great interest rate cut from them. However, it isn't really immediate and could not materialise when the market conditions improve.
Interest rates of regular savings accounts provided by banks is usually lower, although banks may revise their interest rates every so often.
In the situation of some high-interest savings accounts, there are tiered interest rates that require customers to satisfy multiple criteria, for example crediting of salary, transacting utilizing their credit cards and looking after a monthly expenditure in the form of insurance or investments. This higher interest might seem attractive but is just simple for those who can hit the factors per the bank each month.
#3 Using SRS Funds in StashAway Simple
Another difference that sets StashAway Simple apart from the conventional savings account may be 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 employed like a tool to savor tax relief. However, an average SRS account with banks only offers 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 is to invest the monies. But for people who would rather place their SRS funds into instruments with a higher yield while limiting exposure to high-risk, StashAway Simple could be a good option.
Given the structure of StashAway Simple, there is no doubt that there are some risks involved. For individuals who want risk-free investments to grow their, they can consider other relatively liquid products such as fixed deposits or the Singapore Savings Bonds, in which the interest on deposits is guaranteed through the banks or government.
Investing With StashAway's Robo-Advisor Platform
If you intend to potentially earn more on your monies (by taking on slightly greater risk), you might want to take a look at StashAway's robo-advisor investment solution. For DollarsAndSense readers, StashAway is giving 50% off in management fees for 6 months, for approximately $50,000 in portfolio value.
We won't be charged any management fee nor have any of our funds contribute to our AUM for that calculation of management fees for our StashAway Simple portfolio, and this exclusive offer is for its StashAway investment products.
Sign-up free of charge today only at that link!