Today is the maturity of our first bank peso time deposit as a couple. It has been locked for 5 years with 3.5% interest and exempted of withholding tax. We didn't actually have second thoughts of withdrawing the full amount of P59,389.45. Our P50,000 has earned a whooping P9,389.45 in 5 long years. :)
To give you a background, it was the money we have earned on our wedding day. You probably have an idea why we are so clingy to it. Yes, the earning was a miniature compared to having it invested in the higher risk investment. However, at that time, we are still too afraid to test the waters with both our feet. Thinking that we would eventually lost it. More so, our knowledge on handling money and personal finance was limited. 5 years seems too long to keep the money, at that time, but we dove into it nonetheless. As we go along, we have learn that of the same amount, there are better ways to earn greater than just putting it in the bank. But like, anyone else, we made mistakes and continue to try to be better.
These bank time deposits are basically for conservative investors, where you wanted to keep the capital and earn small amount ranging from 1 to 3.5% annually. It is one of the safest form of 'keeping' your money. However, with the current inflation rate, our money is losing its value over time. Of course, we do not want that to happen.
If you still wanted to have this type of 'investment', you can check each banks to determine which give the highest interest rate for a certain period of time. Also, look for those with tax exemption. Remember to read the papers.
I am pretty sure, we won't do this anymore in the future, unless for the Emergency Funds. In a shorter period of time.
Take note that IN the emergency fund, there should be an amount which is readily accessible. We all know, that savings account alone is barely earning. Mostly, it has 0.25% less 20% of withholding tax. Yet, we really need it to be liquid.
Next to savings account, you can always tier it with time deposits which has only a month lock in or two. Yes, there are banks which offer this. Eastwest Bank is an example. They have terms ranging from 30, 60, 90, 180, 360 days, up to 5 years.
The problem with having to tier it, is monitoring. Tedious. But, of course, the bank can just roll it over on the next month, if you do not want to be bothered going to the bank. This will still serve its purpose as Emergency Fund.
Why? For sure, the amount you have put in the savings account as an emergency fund covers at least 3 months of your living expenses. The standard, well, there is really no standard when it comes to Emergency Fund, but more often, the book will tell you it should be equal to 6 months worth of expenditures. There are some, who goes up to the extent of one year. By the time, your liquid money was exhausted, your time deposits which was lock in for 1 or 2 month/s can now readily be withdrawn without any pre termination fee. Sounds good, right?
This may work to some. To others, it won't. Different strokes for different folks. Find strategies which works for you. Don't give up if it is difficult at first. Continue working on it until it is already part of your system. And don't forget to continue educating yourself.
For now, we have put the amount in our joint savings account and waiting for the next opportunity to invest it. Maybe, on a corporate bonds, an RTB, or on a Cooperative which we have been studying since 3rd quarter of 2017. I'll keep you posted. :)
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