Don't make your money sleep in the bank

Probably, most of us were taught to keep a piggy bank or any money box when we were young. It's often the thrift-conscious parents who encouraged children to keep one and taught them the virtue of thrift. But with the fast changing world ushering a highly sophisticated financial system, I assume that piggy banks have been put out of commission in most homes, particularly in big cities. Most parents, particularly those who have acquired some education, are teaching their children to save in the banks.

Whether we teach our children to save money in a money box or in the bank, the idea of saving remains the same - to raise the kids' awareness about the importance of keeping spare money for some future use and how to manage their expenses. Personal finance education should start from childhood. Children who are taught the virtue of thrift will find it easy to save and go about their finances pretty well when they become adults. They are the ones who are likely to get well-off in life.

In our fast changing times, it has become necessary to teach children not only how to save but also on how to make their money grow. Definitely not by putting their money in a savings account. With an interest rate of a little more than one percent a year, a savings account will make the child's money sleep and let the bank earn from the money they keep. While banks earn much from money entrusted to them for safe keeping, the child's money is frozen.

Here's what Philam Life, the insurance company which also manages mutual funds, says about keeping one's money in a bank savings account and even time deposit: "Many Filipinos believe that putting money in bank deposits is the best way to grow their money and keep it safe. The reality is, saving and time deposits are earning 1.50% or less annually. With inflation currently at 2.6%, the purchasing power of your money will be diminished over time."

Philam advises those who have idle money to invest it "in the right long-term financial products to match your long-term financial goals" and "maximize the growth potential of your money." I have a mutual fund with Philam Life which I invested on invitation after my life insurance policy matured about five years ago. It's earning pretty well which prompted my wife and I to withdraw our savings account from a state-owned bank and invested much of them on a mutual fund in a private bank.

Banks have investment plans that can make your money grow faster than if you put it in a savings account or a time deposit. They have high-yielding plans but these are too numerous for me to provide the details for each of this. It you want to make your money grow, it's better that you go to the banks and ask for their investment portfolios or facilities. I can only tell you from experience about my mutual funds both with Philam Life and the bank where my family keeps money.

When my insurance policy with Philam matured five years ago, the company informed me about it with an invitation to invest the money in a mutual fund. Since we did not have an immediate need for the money, I heeded the advice. My insurance policy was for P100,000 but the due amount dwindled down to a little more than P60,000 because I took a loan which I failed to pay back and just allowed Philam to make deductions from whatever would be left of my insurance. A spendthrift when I was young, I grew up not caring much about savings.

When I checked a year after I invested the money in mutual fund, the money grew to more than P65,000. I suggested to the man handling my account that I wanted to invest more but he told me that their unit managed only money from insurance policies that have matured. That gave me later an idea to invest in a similar mutual fund in the bank, but between my investment in Philam and that in the bank, Philam's is more high-yielding.

Aside from our mutual fund investment, my family has also kept a time deposit in the same bank. Since I became conscious of our finances, I have been experimenting on which financial plans would yield higher returns. Our mutual fund investment is earning more than thrice our time deposit. I wish I had become aware about the importance of managing our finances well much earlier, but then I don't want the word "regret" to creep into my life's vocabulary.

Again, I think this article has become quite long enough. Time is gold and I don't want to take much of your time. So Until the next article. I hope you find my articles useful.

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