Which Way To Go, Bank Deposit Or Mutual Funds
Many of us Filipinos who are thinking of preparing for the future is putting our money in the bank. Thinking that this is the safest way to do it since we can easily pull out the money in times of need. In fact some of those who save in the bank and wanted to grow their money invested in time deposits.
The usual interest range now a days in a savings deposit is from 0.1% to 0.4% depending on the type of bank. The top commercial banks in the country are giving the lowest interest rate while those local rural banks are giving higher interests.
In time deposits, the usual range of interest rates per annum is from 0.5% to 2% only, depending on the bank you are depositing, the period of time and the amount of deposit. The returns of our time and savings deposit are guaranteed. But it is subject to tax.
Although our deposits in the bank are intact, there is this thing that silently rob your money. It is called inflation. The inflation rate now is much higher than the interest we earn in the bank. The inflation rate is 3% which means that the real value of your money is losing a minimum of 1% per annum.
So if we really want to grow our money and be prepared for our retirement, for our children's education, or for our dream house or our dream travel, we should put our money in financial instruments that could combat inflation and boost its value like mutual funds.
In mutual funds, your money will grow to about 5% to 10% annually, and sometimes higher. In fact, in 2014 some mutual funds earned a resounding 14% to 19%. And even though the said interest rates are not guaranteed because it will depend on the performance of the stock market, and your money's return is not guaranteed as well, if you put it there for a long time, it will surely grow. The longer the time it is invested in mutual funds, the higher the growth of your money.
So which way to go, bank deposit or mutual funds?
The answer is both, and we can enjoy the best features of both.
For the money that we will keep for emergencies and for our immediate needs, the best way to keep it is through bank deposit. It is safe in the bank and the best thing is we can immediately withdraw it in times of needs.
But for money that you want to set aside for the future, shall we say 5 years to 10 years or more, mutual funds is the best financial instrument. So if that money is intended for your children's education in the next 10 to 18 years, or for your graceful retirement in the next 20 years, or for your dream travel in the next 5 years, or for your dream house in the next 8 years, it's wiser to put it in mutual funds.
So if you haven’t started your financial planning, and you haven’t invested yet in mutual funds, call your financial advisor (some people call them insurance agent, or life insurance agent) now. I’m sure they will be more than happy to assist you. Or if you don’t have one, you can contact me. Please see the contact info at the upper right side of this website.