I’ve been a huge fan of personal finance and financial literacy for a while now.
Sure, we’ve made a looot of financial mistakes over the past years and while there are times that we regret making them, sometimes we can’t help but be grateful because those hardships are what helped shape us financially, emotionally, and psychologically.
The biggest catalyst to us wanting to learn to manage our finances properly (and then later on, fix it) is our kids. It’s truly amazing how much becoming a parent can change you and your priorities in life.
But whether you’re a parent, soon-to-be-one or have no plans in the near future just yet, it doesn’t mean that you shouldn’t take the first step in learning how to invest. After all, our money is a finite thing and our bodies can only work so much. So…best we keep them and make our money work hard not just for our future (retirement) but also for our kids.
Since it’s nearly June and this means that a lot of my former colleagues and friends will be getting their midyear bonus, I thought of sharing some of the best ways that they can start saving/investing their hard-earned money.
No need to invest your ENTIRE bonus, especially if you are just starting. Unless you really want to, allot a portion for guiltless spending because…you earned it!
Now, let’s get started… where should you place your hard-earned Php 5,000?
Take note: I’m keeping it at Php 5,000 because it’s a small amount (at least for those earning bonuses) and it isn’t too intimidating for those just starting out.
1. A Good ‘Ol Savings Account
Assuming you have zero in emergency fund (err…talking to myself), then it’s high time that you get started on this one.
Why? Because you never know when emergencies come – and nope, a shoe sale or the launch of the latest mobile phone is not an emergency!
A good rule of thumb is to keep away 6 months’ worth of expenses tucked away in an account that is very liquid (this means that it can easily be withdrawn with no fees/charges to your account).
Unfortunately, there aren’t a lot of banks in the Philippines that help you automate your savings but I’ve been with BPI for several years now and they have a Save-Up account that you can open online. Once you open an account tied to your savings account, you can schedule transfers automatically so you save money without even thinking about it. Out of sight, out of mind!
Another alternative would be to open a passbook account, preferably with a bank that is not very convenient but offers online banking. Currently, the partner has a passbook account with Metrobank, which we cannot withdraw from unless we go to the bank. Transfers towards this account is still convenient since we do it via GCash. The only loophole we’ve found is if someone decides to “exchange” our money (eg. our Metrobank funds for their BPI funds) but still, we found this to be quite effective in building up funds.
2. Time Deposit
This is almost similar to having a savings account although not as liquid.
The shortest maturity date I’ve found for time deposits is 30 days, which means you’ll have to keep your money within that time period in the bank. The plus side is that it offers a bigger interest than savings accounts.
The only time I’ve tried opening a time deposit was more than six years ago with Chinabank.
Shop around for different time deposits and compare opening amounts, interests and lock-in periods.
3. Pagibig MP2 Savings
This form of saving has become very popular among the local finance groups mostly because of the high dividends that it provides. At 8.11% yield as of 2018, it’s not surprising why so many people are opting to save with the government.
A few things to keep in mind:
- You need to be an active Pagibig member (shouldn’t be a problem if you’re employed; minimum contribution for voluntary members is Php 100 or Php 200 for those with existing loans)
- You can apply for the Pagibig MP2 program online but, based on my experience, you will have to go to your nearest branch to provide some documents and make your first payment.
- Contributions can be as low as Php 500 per month, with no upper limit, or you can do a one-time bulk funding instead. You are also not obligated to make monthly contributions.
- Your MP2 account number is different from your Pagibig number. I pay via GCash (Php 5 fee) and made the mistake of using my Pagibig number for several months so I had numerous contributions last year. LOL
- The MP2 program has a maturity of five years. After that, you can opt to withdraw or continue your funds for the next five years.
- There is currently no way to check your contributions online (as with the mandatory one) so you’ll have to visit your nearest branch to ask for a print out of your contributions.
I started my MP2 last year, the partner’s in the middle of the year last year, and I’ve yet to see how much I’ve earned so far.
Read more about the Pagibig MP2 program here.
4. SSS Peso Fund
Similar to the Pagibig MP2 program, you can also enroll yourself in the SSS Peso Fund program. However, it also has a lot of major differences:
- Contributions are allocated to three different types of accounts: 65% retirement/total disability; 25% medical; and 10% general purpose.
- You have to have paid at least six consecutive contributions in the past 12 months prior to enrollment. Unfortunately, because we were still voluntary members last year, we failed this one. We should reach 6 months mid this year and can hopefully join the program by then.
- The program requires a minimum of Php 1,000 per contribution and a maximum contribution of Php 100,000 per year – that’s about Php 8,333 per month.
- The Peso Fund works like your insurance policy. No withdrawals can be made from the 65% retirement/total disability account except if you retire or suffer from total disability. In this case, you have the option to receive a monthly pension, a lump sum or a combination of both.
- The Peso Fund is designed for long-term savings. Thus, any withdrawals made within the 5-year retention period will incur penalties and fees.
5. A Mutual Funds or UITF Account
One of the first investment accounts we opened in our financial freedom journey was a mutual funds account.
The good thing about mutual funds is that it takes away the need to study the markets because there is a fund manager that does that job for you. While we check out the current NAVPS (Net Asset Value Per Share) for our funds to see if it becomes really cheap, we mostly do the Peso Cost Averaging technique.
This means we add in to our MF account on a regular basis (monthly or bimonthly), regardless of how the market is doing. I also have this scheduled through my BPI account so you can set it and forget about it. We’ve also tried this setup with Metrobank – as they belong to the same company – and GCash now allows funding through their Bills Payment feature.
So far, we have a Save & Learn Equity Fund with FAMI for five years and we’ve only started seeing gains. Pro tip: Cheaper NAVPS isn’t necessarily a bad thing because it means you can stock up on more shares since they’re much cheaper!
UITF works pretty much the same way, except that these are offered by banks. This is also a good alternative because you can just open one with your existing bank and set scheduled payments and forget about it.
6. A Stocks Account
If you’re brave enough or would like to directly invest in your stock of choice, then go ahead and open a stocks account. There are plenty of brokers out there but the one we currently have is with COL Financial.
Pro tip: You can also now open a mutual funds account through COL Financial. It makes things easier to monitor since you only look at one dashboard!
We tried attending a Technical Analysis talk with COL Financial once but it was too much to figure out and we didn’t have that much money to invest/lose for now so we’re also opting to do a Peso Cost Averaging Strategy with our stocks. We are also invested in blue chip stocks in different sectors, as well as an ETF.
When we have more money to buy stocks, we’re planning in subscribing to Bo Sanchez’s Truly Rich Club or Pinoy Investor for stock recommendations. COL does provide a COLing the Shots report to their account holders where you can find out Buy Below Prices for their stock picks.
You can now open an account with COL for as low as Php 1,000 and top-up for a minimum of Php 1,000. However, experts suggest buying stocks worth at least Php 8,000 to make the fees worthwhile.
7. A VUL Policy
If none of the above work for you or if you’re still way above the Family Financial Road Map, then consider getting a VUL.
Variable Unit Linked policies are basically insurance policies with an investment component. The main difference these policies have with traditional term life policies is that you do not only insure yourself but also invest a portion of your monthly premiums.
I’ve totally forgotten what my former agent discussed to me but it takes around 5-7 years for you to break even. That means, just like most investments here, you will be in it for the long haul – which makes perfect sense anyway because legit investments take time to mature and gain profit.
Depending on your riders (you can totally opt out of all of them), you can pay as much as Php 3,000 per month for your policy. This was how much I paid for a 2M coverage with a gazillion riders also worth about 1M each.
Currently, the partner has a VUL policy with Insular Life and costs him Php 2,700 per quarter. It has zero riders and a 1M coverage. Mine, on the other hand, is a term life policy with Sun Life, with zero riders and a 1M coverage costing me Php 7,850 per year for the next five years.
8. A PERA Account
This has been in my wishlist for almost two years now, but continues to be pushed back because…we need to build on our other investments and pay off other debts first.
The PERA (Personal Equity & Retirement Account) is almost similar to the 401k in the US. What of the things I love about it is that you get a 5% tax credit of your total PERA contributions and use it to pay your income tax liabilities, which is extremely helpful especially for business owners like me.
There are already several banks offering this product, including my personal favorite BPI. You can check out this page to learn more.
You can open a PERA account for as low as Php 1,000 or as much as Php 100,000 per year (Php 200,000 per year for OFWs). However, it is suggested to do a lump sum every year because you’ll have to pay a significant amount for administrative fees every single time.
Bonus: Invest through GCash
I love GCash because it’s easy to get my money from PayPal and move it to my BPI or Metrobank account.
Recently, they rolled out a new product that allows you to invest your money in a Money Market Fund for as low as Php 50. Crazy, right?
Which one are you getting?
Whew. That’s a lot of options!
Which investment vehicle will you be placing your midyear bonus in?