Should You Save or Should You Invest?

August 2, 2013 | Posted by: Moneymax | Personal Finance

August 2, 2013

Save save save! It’s all about savings! We are always told to save our money when we are young. Even when we get old we are still repeatedly reminded that one never gets too old to save. Live till old age, and save till old age! When it comes to savings, time deposits and regular savings accounts always cross our mind. However, if you are placing your money in these instruments for your long-term financial needs, you are making a terrible mistake! Read on to discover the hidden truth!

Do you choose the right instruments according to your financial needs?

Most of us believe that it is a wise option to put aside our money in the savings accounts as we can earn a fixed amount of interests over a certain period. At the same time, we are even willing to pay the annual fees and other charges as we are convinced and reassured that our money is safe-guarded in the banks with the steel vaults and security guards.
Undeniably, savings accounts and time deposits are suitable for savings, but they appear to be good and sound options only when we choose these instruments to fulfil our short-term financial needs.
However, as seen by the trillions of pesos in the banks of The Philippines, we can tell that most of the Filipinos are placing their hard-earned money in these short-term instruments to fulfil their long-term financial needs.

Your Money Is Sleeping Instead of Growing!

It’s true that your money is safe and sound in the banks, but they are sleeping most of the time! Now, please hold your jaw with both of your hands as they are going to drop in a fraction of second!
According to an article in The Philippine Daily Inquirer, the depositors who place their money in the banks are earning a meager amount as the average annual interest rate of the savings accounts is only 1.04 % in March 2013. Don’t forget that the depositors are charged with a 20% withholding tax which further reduces their profit.
At the same time, according to The National Statistics Office (NSO), the inflation rate in the Philippines was recorded at 2.80% in June of 2013. If you wish to know more about the fluctuation of inflation rates in the Philippines throughout the year, please click here.
When the inflation rate hits 2.80% and you can only earn 1.04% (or maybe even lower) interests on your savings accounts, it’s as bright as day that your net yield is being eaten by the inflation! Here’s a food for thought-Are the bank savings accounts the right places for your money to grow (or sleep)?

The Mutual Fund, UITFs and VULs

If all you want is just a safe place to keep your money, I would suggest you to buy a safe and place it at home so that you can get rid of the burdensome annual fees and taxes that are charged by the banks. However, please be well-prepare as you may end up facing the depreciating purchasing power when the inflation rates are rising.
However, if you wish to invest, there are several types of investment vehicles available in the Philippines such as the stocks, bonds, mutual funds, Unit Investment Trust Fund (UITF) and Variable Unit Linked Investments (VUL).If you want to grow your money while ensuring that your hard-earned money is kept by reliable and trustable agencies, you can consider the mutual funds and UITFs that are the most popular investment instruments in The Philippines.
If you have had invested in both of these investment vehicles and you would like to expand your investment portfolios, please have a look at the VUL products offered by the The Philippine American Life and General Insurance Company (Philam Life) – the Philam Life Money Tree! Let’s see how your money grows on the Philam Life money tree!