A fixed deposit (also known as a time deposit) account is a type of bank account that pays account holders a fixed amount of interest in exchange for depositing a certain sum of money for a certain period of time.

Even though fixed deposits offer higher rates than the interest rates offered by most savings accounts, most people do not regard fixed deposit accounts as a form of investment as their interest rates are lower than the inflation rates in Singapore which is estimated to hover around 2.5% to 3.5% annually.

However, that’s not to say that you should immediately write off fixed deposits as a component of your investment portfolio because unlike other forms of investment, fixed deposits are nearly risk free unless the bank collapse. The interest rates are fixed, so you won’t have to worry about market fluctuations. Even if something does happen to the bank, your deposits are still protected, up to $50,000, thanks to the Singapore Deposit Insurance Corporation or SDIC.

If you have a large sum of cash that you don’t intend to spend, putting it in a fixed deposit account will enable you to earn higher interest than if you leave it in a savings account. Interest payments are made like clockwork at regular intervals, often quarterly or annually and fixed deposits are highly liquid. You can withdraw your money anytime, although there may be financial costs to closing your account earlier.