StashAway Simple Cash Management Account Vs Regular Savings Accounts – What’s the Difference?
This article contains affiliate links. DollarsAndSense may receive a share of revenue from your sign-ups.
StashAway has recently launched a new cash management portfolio called StashAway Simple, which combines services and features that are similar to savings and investments in one platform, allowing users to monitor their cash holdings and investment portfolio in a convenient, consolidated place.
StashAway Simple aims to deliver a projected net return of 1.9% per annum on any amount placed with them, without any lock-in periods or minimum balance. This is comparable with other no-frills, high-interest savings accounts.
Despite the similarities with regular savings accounts from banks, there are some differences between the two which are important to understand before signing up.
#1 StashAway Simple Is Not A Savings Account
The first point you should understand about StashAway Simple is that it is a cash management account and not a savings account.
Unlike a savings account where your money is deposited with a bank, your deposits with StashAway Simple is allocated equally into two funds – Money Market Fund (MMF) which is made up of short-term money market instruments, and Enhanced Liquidity Fund (ELF) which consist of debt instruments.
The combination of the funds makes StashAway Simple a riskier choice as compared to conventional bank accounts, although the risk is significantly lower than typical growth-orientated investment portfolio.
StashAway Simple does not come with any sales charge or any minimum balance. Instead, any rebates from management fees are credited back to account holders 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 can’t withdraw funds in StashAway Simple from an ATM, nor use it to pay your bills, issue a cheque based on funds from it, or other functions you come to expect from 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 1.9% per annum. While the structure of the projected net return is flat and easy to understand, this rate is not guaranteed and may fluctuate according to economic conditions.
|Weighted yield to maturity||1.8%||2.38%||2.09%|
|Expenses||– 0.35%||– 0.31%||– 0.33%|
|Rebates from Fund Manager||+ 0.125%||+ 0.125%||+ 0.125%|
|Projected Rate||1.575%||2.195%||1.885% p.a. (Rounded up to 1.9% p.a.)|
According to StashAway, this projected rate is derived from the rate of returns of its underlying investments (MMF and ELF), after deducting away expenses and adding rebates, and rounding up to one decimal point.
On the other hand, the interest rates of regular savings accounts offered by the banks is fixed, although banks may revise their interest rates from time to time.
In the case of some high-interest savings accounts, there are tiered interest rates that require customers to satisfy multiple criteria, such as crediting of salary, transacting using their credit cards and maintaining a monthly expenditure in the form of insurance or investments. This higher interest may be attractive but is only practical for those who can hit the criteria specified by the bank each month.
#3 The Use of SRS Funds in StashAway Simple
Another difference that sets StashAway Simple apart from the conventional savings account is the flexibility of diverting Supplementary Retirement Scheme (SRS) monies.
SRS plays a complementary role to one’s CPF savings, and can also be used as a leverage to obtain tax relief. However, a typical SRS account with banks only provides an interest rate of 0.05% per annum on SRS savings.
Due to the low-interest rates, this places SRS savings into a risk of erosion of value over a period of time. The usual choice of many SRS account holders will be to invest the monies. But for those who would prefer to place their SRS funds into instruments with a higher yield of return without exposing to a higher risk, StashAway Simple would be a good option.
On the other hand, it is virtually impossible to place SRS monies into high-interest rate savings account without avoiding incurring penalties from the premature withdrawal of the SRS funds.
Given the structure of StashAway Simple, there is no doubt that there are some risks involved. For those who are risk-averse, they can consider other relatively liquid products such as fixed deposits or the Singapore Savings Bond, where the interest on deposits is guaranteed by the banks or government.
Investing With StashAway’s Robo-Advisor Platform
If you wish to potentially earn more on your monies (and take on additional risk), you might want to look at StashAway’s robo-advisor investment solution. For DollarsAndSense readers, StashAway is giving 50% off in management fees for 6 months, for up to $50,000 in portfolio value.
That makes it perfect for taking StashAway on a test drive and see if it is the robo-advisor for you. You can also start investing your SRS funds with StashAway to start growing your retirement nest egg today. Sign-up for free today at this link!
The post StashAway Simple Cash Management Account Vs Regular Savings Accounts – What’s the Difference? appeared first on DollarsAndSense.sg.