Protecting Your Savings (Even from Yourself)

Filipinos love to spend money. And a lot of it. We love to splurge on things that chip away at our hard-earned savings: the latest gadgets, food, festivities, gifts, travel expenses… among other things. According to the BSP and World Bank, only four out of ten Filipinos have savings with only 31% of the population having bank accounts. Most Filipinos live from paycheck to paycheck, with no reserves to fall back on. The battle between our savings and the newest smartphone from Apple or Samsung ends with our bank account as the victim.

So, ask yourself: “How do I protect my savings?” Because self-restraint has probably failed you more than it should, the simple solution is to deposit your money on accounts that prevent you from withdrawing from them. You’ll be forced to save and can even grow your money in the process.

Enter time deposit accounts.

A time deposit is a type of account that essentially serves as an investment by offering higher interest rates. In return for higher interest rates, the account requires you to keep the deposit untouched for a fixed period of time. After the said period, your time deposit matures, meaning you can either withdraw your funds (plus your earnings) or deposit them again.

Let’s say you deposit PhP100,000 on a time deposit account at 2% interest for one year. It means that for one year, you can’t withdraw the P100,000 that you deposited. But after that period, there will be P102,000 in your account:

P100,000 (initial deposit) + P2,000 (2%*100,000) = P102,000

Why time deposits?

Compared to savings and checking accounts, time deposits earn higher interest rates. Time deposits are also insured up to PhP500,000 per account name by the Philippine Deposit Insurance Corporation. While traditional investments can earn a higher return, time deposits require no effort after your initial deposit has been made. In short, a time deposit gives you higher returns than a regular savings or checking account with significantly less risk than an investment. More importantly, because your money will be locked-in for a certain period, it’s even protected from yourself (and your sudden urges to spend).

Choose a duration that fits your goals.

The rule of thumb: the longer the duration, the higher the interest rate. If you’re looking to save for your kids’ college tuition or your retirement, a long-term time deposit (1 year or more) might be the best option. But if you have more immediate financial goals, then a regular time deposit (starting at 30 days) will allow you to be more flexible in your finances.

Open a Time Deposit in different currencies.

You can take advantage of different currency exchange rates by putting your foreign currencies in a time deposit. Different banks carry different interest rates per annum, with foreign currency accounts carrying higher interest rates than a normal savings account or even a regular peso time deposit.

To get the most out of a time deposit, lay down your goals beforehand. Are you saving for a car? Your son’s tuition? It is for your retirement? Having a clear vision of where the money will go will have an effect on the placement term you’ll choose. Think of it as your nest egg, tucked away from your prying hands, preventing you to use it until you reach your goal.

Source: Security Bank