Working towards a financial milestone and wondering where to stash your funds? You have several avenues to explore, including savings accounts, fixed deposit schemes, short-term endowment plans, and investment accounts.

The ideal choice hinges on a few key factors: the time horizon of your goal, your desired earnings, and whether you will need access to that money during your specified time horizon. Let's explore how to determine the most suitable savings or investment option for your needs.

Understanding the different cash management solutions on offer can help you select the best option for your needs. As you decide where to keep your funds, keep these features in mind:

• Withdrawal accessibility: Certain accounts, like fixed deposits and endowment plans, may impose penalties for early withdrawals. If you anticipate needing access to your funds in the near future, this will significantly influence your choice of account.

• Interest rate and potential returns: The interest rates offered, or the potential investment income, can vary considerably across account types and financial institutions. Higher rates or returns can accelerate your progress toward your financial goals.

• Time horizon: Consider the total amount you need to save to reach your goal and the timeframe within which you have to achieve it. If your goal is several years away, it may be beneficial to shift your focus from simply saving to exploring investment options.

Short-term savings are defined as goals that will take two years or less to achieve, such as a holiday or home renovations. Consider the below options for stashing this money:

• High-yield savings accounts (HYSAs): In Singapore, HYSAs are typically offered by wealth management platforms like Syfe and StashAway instead of brick-and-mortar banks. The good thing about HYSAs is that your money isn’t locked away for a fixed period of time, allowing you to access it where needed. However, keep in mind that returns aren’t guaranteed – rates can fluctuate according to market movement.

» MORE: What are HYSAs?

• Fixed deposit schemes: Fixed deposits are offered by banks and involve locking your money away for a fixed duration. In exchange, you get a guaranteed interest rate, which is higher than that offered by traditional savings accounts. Most banks in Singapore offer fixed deposits over a 6- or 12-month tenure, but keep in mind that a minimum amount is usually required. 

• Short-term endowment plans: Even if you only have a two- or three-year time horizon, you will find endowment plans out there to suit your needs. Returns range from 2% p.a. and can go up to over 5%, however take note that endowment plans typically require a minimum amount, and that your money will be locked up for the entire term.

Have a financial goal you wish to meet within the next two to ten years, such as funding your child’s education? Consider the below options for meeting those medium-term goals:

• High-yield savings accounts (HYSAs): Because of the liquidity HYSAs can provide, they continue to be a suitable option for meeting medium-term financial goals. In addition, if you are able to commit your funds for a fixed period of time, usually six months or a year, you will find certain ‘guaranteed’ options to choose from, meaning that your returns aren’t subject to market fluctuations.

• Endowment plans: Mid- to long-term endowment plans are a good option if you have a longer time horizon in which to achieve your financial goals. Premium terms start from five years, and you can expect better returns compared to short-term endowment plans. Again, keep in mind that your money will be locked up and terminating your policy early will result in a penalty.

» MORE: Fixed deposit, endowment plan or cash management?

• Singapore Savings Bonds (SSBs) and Treasury Bills (T-Bills): Technically, SSBs and T-Bills are considered investments. However, they are considered low-risk, making them a good choice for meeting a medium-term financial goal. Both can be purchased through local banks and whilst a generally safe choice,you can expect lower returns on SSBs and T-Bills compared to higher-risk investments.

Looking even further ahead to the future (for instance, to the time when your child starts university, or for your retirement needs)? To meet long-term financial goals, consider the following options:

• Investment plans: Want to start investing, but not sure how? Long-term financial goals can be met by starting an investment account with a local bank, such as DBS Invest-Saver, which does the hard work for you. Each diversified portfolio can be made up of the assets of your choice, from ETFs and unit trusts to stocks and bonds. These accounts make use of dollar cost averaging, a long-term strategy which means that you never have to worry about timing the market.

• Singapore Government Securities (SGS) bonds: Fully backed by the Singapore government, these bonds are a great way of growing your savings over time. No minimum tenor or amount is required, and you can choose to withdraw your capital at any time without incurring a loss or penalty. With that said, keep in mind that the longer you leave your money tied up in SGS bonds, the higher the eventual return rate!

Regardless of the specific time horizon you have, you will find a wide range of options for growing your savings in Singapore. Always evaluate your risk tolerance before committing your cash to an investment or savings account, making sure that it’s the right option for you.