3 Levels of War Chests

I have classified 3 levels of war chests to store cash and unlock for deployment into different purposes. 

Primary
Savings Accounts, Money Market Fund

 

The first level is the most liquid cash in savings accounts that can be withdrawn from ATMs for daily cash expenses in coffeeshops or paynow, paylah to pay cash to others instantly. It is also used to receive incoming cash flows from salary, allowances, dividends.

I do not use any of the high interest savings accounts i.e. DBS Multiplier, UOB One or OCBC 365 accounts that pay higher interest rates but dictate the credit of salary, the amount of spending through credit cards, purchase of insurance or endowment plans and loans because I usually have very low cash levels in my savings accounts and prefer freedom and flexibility in using any credit card to make purchases or pay bills.

As I mainly use Phillips brokerage's Cash Management account to purchase my shares and Reits for investments, I usually store cash meant for investment in the Poems money market fund (MMF) account for automatic settlement of trades and management of excess funds. It used to be able to pay more than 1.5% p.a interest but in current low interest environment, the MMF is only able to yield around 0.4% p.a. 

There are many other cash management accounts such as Endowus cash smart, Syfe Cash+, Singlife, LionGlobal etc. that offer higher than average interest rates for you to park your funds in a war chest. The main risk of parking your hard earned money in these money management solutions will be the default risk of these financial institution offering such services. For new entrants or less reputable companies, a higher interest rate is expected due to the greater risk.

Secondary

Fixed Deposits, Singapore Savings Bonds

 

The second level of war chests I employ are liquid but usually require some time or effort to unlock the funds. For withdrawal of funds from fixed deposits in banks prematurely before due date, the interests will be forfeited and the principal amount will be returned back together with prorated interest rates at savings account levels which is usually around 0.1%. There is some forfeit of the interests but no loss of your money hence I feel fixed deposits are a good way to store emergency funds.

Another less liquid war chest will be Singapore Savings Bonds (SSB), which have seen the interest rates plummet from the highs of more than 2% in 2 years ago to less than 0.5% in recent months. Redemption of the bonds can be through ATM or Internet banking and your principal amount with prorated interests will be returned back to your bank account but this usually take some time to process. I have $50k of SSBs which I do not have intention to redeem as those were yielding more than 2% p.a risk free.

Safe Treasure
Gold, Long term bonds, Endowment Plans, Properties

The most illiquid form of war chest will be assets that are physical or will incur more time or penalty if they were to redeemed into cash. Gold, silver, antiques and even branded or electronic goods are some examples. I do have gold and jewellery that I do not factor into my net worth. Older folks and some people do have the habit of pawning their gold or jewellery in pawn shops for short term cash loans and then redeem their assets back at high premium when their cashflow situation is less tight. This is why the businesses of Money Max and MaxiCash still thrive in today's environment. 

Carousell offers a platform for us to sell off our preloved electronic items such as phones, computers, clothes to encash. Long term bonds are less liquid and traded with low volumes on the market but are still valuable assets that can be encashed if need be. For insurance or endowment plans, usually there will be hefty losses of the principal capital if we terminate the policies early because such plans will take 20 to 30 years to breakeven. There are companies such as Reps Invest and Sg Asia Capital which actually buys back insurance and endowment policies at slightly higher amount than if we were to terminate them prematurely. I think they could actually resell those policies to interested buyers who are willing to take over for insurance protection and coverage of health and critical illness. 

Lastly, properties especially spare ones generating rental income could be sold off to raise funds for huge purchases or to tap on great investment opportunities. I have not achieved such level of asset class yet but I do know a handful of people nearing retirement have achieved such great feat of having a tertiary war chest which could be unlocked or when locked, still offers consistent passive income. 

I have briefly talked about the various levels of war chests. I hope it helps to prompt your thinking and restrategization of your own financial management methodologies to meet your daily needs and seize investment opportunities that arise from time to time. 

Thanks for reading. Stay strong and be safe!

With love & peace,

Qiongster