You may already have encountered some people who talk about investments and how it is way better than saving your money in banks. Yet, in some instances, you might also hear that investments are not worth it and it’s better to be safe and save your money in the bank. Well, the answer is, it depends. The choice greatly relies on what you see as purpose of your money.
You have total control of the cash that you carry right now. In fact, you could spend all your money down to the last cent this very moment. These days, it’s easy to buy anything and spend any amount of money. That’s how fickle money is. You may recount some news you hear on lottery winners who had poorly spent their enormous capital in just a matter of months, which most thought as impossible.
On the other hand, you also have the power to use your money wisely. For most people, using money wisely means saving it in order to allot it for a better use in the future.
However, just putting money in the bank may not entirely be a wise decision. You’re 100 thousand pesos today, might not buy as much goods in 5 years compared to what you can buy today.
Yes, inflation is real and it has a yearly average of 8 percent here in the Philippines. The annual interest gain rates for your money in the bank is about 3 percent. As you can see, money is not really growing and it definitely depreciates over time when you put it solely in the banks.
However, placing money in the banks also has its benefits. You can withdraw your money anytime and it is perfect for dire situations where you need the ready cash.
In investing, you do have a chance to increase your money significantly. This depends on what investment modes or vehicle you avail. There are lot of investment opportunities out there. It’s important to note that a considerable amount of Filipinos are not into investments yet.
Here are some of the common modes of investments:
Stocks - a very good way to invest and you can take a role as daily trader or long term trader. Gains are likely, yet risks are moderate to high. This depends on how you do your trades.
Mutual Funds - if you think stocks is not your thing but you still want to gain, then you may want to trust your money to established organizations of professional traders to do the decisions for you. This is how mutual funds work. Most banks offer mutual funds. Mutual fund organizations have their own risk profiles that you can compare and help you decide which one is for you.
Cooperatives - it’s another famous investment model. Though I have to be honest I’m not so particular about this. I know however that you trust a cooperative for your money and it will be used as a central fund for the members, optimizing it for gains, thus increasing the value of the money you put up.
What do they all have in common? They have risks. You have to note that you may lose all your money.
If you’re a person who’s afraid to risk or a person who’s not willing to lose, then investment is probably not for you. However, there’s a smart way to invest and it’s just taking a small percentage of your income for these investments. You can check this type of allocation in my previous blog.
What’s the verdict? As you can see, it really depends. If you were to ask me, I’d save in the bank and at the same time invest. It doesn’t really matter if you started small, as long as you stay consistent and set your eyes on the long-term goal.
Want more tips? Here’s something interesting I learned.
An interesting technique I read from a book is to save money in the bank that equals to 6 months of your monthly needs.
Assuming that your monthly salary matches your monthly expense, then you just multiply it by 6 to come up with the money you want to put in your bank. So if you lose a job or an emergency happens, you have spare money to use. Six months is an adequate period to land a new job. Now, you have a secure amount in the bank and the rest of it can be invested.
But for the risk takers, you may just want to invest most of your money. If emergency situations arise, they think abundantly and see through it that they can find money they need, at any given time. That’s one audacious approach but very plausible.
As usual, thanks for reading. Don’t forget to leave your comments below.